Telefonica has started considering alternatives for its UK business, amid signs the European Commission is set to block the proposed sale of O2 UK to Hutchison, Bloomberg reports. The Spanish carrier has been counting on the GBP 10.3 billion from the sale of O2 unit to reduce its debt. With the deal in danger of being blocked, executives at Telefonica are discussing alternatives, according to people with knowledge of the situation.
Those include restarting the sales process for O2, potentially to an industry player like Liberty Global, which owns Virgin Media in the UK, or private-equity buyers. Other options include a spin-off of a publicly traded O2. To buy time, and mitigate the damage from a failed transaction, Telefonica is also moving forward with plans to spin off the Telxius towers group created in February. An IPO of Telxius might bring in USD 4 billion.
However, the much lower proceeds could put the company's promise of a dividend of at least 75 cents a share this year at risk. The dividend hinged on completing the O2 sale and could be paid in shares rather than cash if the sale does not go through.
