Spain's Telefonica to raise up to 1.5 billion euros with Telxius IPO

The logo of Spain's Telefonica is seen on its headquarters outside Madrid, February 25, 2015. REUTERS/Juan Medina/File Photo

MADRID (Reuters) - Spanish telecoms group Telefonica TEF.MC said on Tuesday it would raise up to 1.5 billion euros ($1.68 billion) with the initial public offer of shares in Telxius, its telecoms masts business, as it tries to reduce its debt.

The Telxius share flotation comes after the sale of its British mobile network operator O2 UK to rival operator CK Hutchison 0001.HK for 10.25 billion pounds ($13 billion) was blocked by Europe's competition regulator earlier this year, piling pressure on the Spanish group to find other ways to cut its 53 billion euros of debt.

The company said in a prospectus filed with Spain’s stock market regulator on Tuesday that it aimed to sell up to 40 percent of Telxius, including a discretional option to sell extra shares if demand is strong.

Otherwise it will sell 36 percent, or 90.9 million shares. They will be marketed at between 12 and 15 euros each - valuing Telxius as a whole at up to 3.7 billion euros - and Telefonica aims to have the shares admitted to trading in Spain on Oct. 3.

Telefonica also said this month it was looking at an IPO or trade sale of a stake in O2 UK, adding it would decide in the coming weeks.

Despite the weight of debt the company has so far protected its dividends and stuck by its plans to pay out 0.75 euros a share in 2016. Chairman Jose Maria Alvarez-Pallete told reporters earlier this month cash flow growth was the key to maintaining the dividend, reiterating that the company would review it by the end of the year.

Telxius, which generated 691 million euros in revenues in 2015, aims to pay out 70 million euros in dividends next year against 2016 earnings, according to the prospectus.

Goldman Sachs, BBVA, JP Morgan and Caixabank are the global coordinators of the offering.

Shares in Telefonica were up 0.4 percent at 9.23 euros by 1235 GMT, down from 11.04 euros a year ago. ($1 = 0.8944 euros)

Reporting by Julien Toyer and Sarah White; Editing by Angus Berwick, Greg Mahlich