Telefonica has cancelled its planned initial public offering of infrastructure unit Telxius, citing weak investor demand. The company “has decided to abandon the offering because it regards the valuation of Telxius implicit in the purchase orders as inadequate,” said Telefonica in a statement submitted to stock market regulator CNMV, adding that it would “continue analysing strategic alternatives in connection with the asset.” A source close to the operator cited by the Financial Times said the valuation process had been affected by the “market situation” as well as by “lesser knowledge” among investors of Telxius’s underwater cable businesses. The company had taken the decision not to sell assets "at a loss" because it had "sufficient options to keep its investment grade rating." Bloomberg added that investors had balked at paying the asking price of EUR 12-15 a share, according to unnamed sources.
Telefonica had hoped to sell as much as 40 percent of Telxius to help reduce its EUR 52 billion debt burden, seeking a valuation of as much as EUR 3.75 billion for the unit. Telxius was set up at the start of this year to control a number of the operator's network assets, from towers in Spain and at operating subsidiaries such as Telefonica Deutschland and Telefonica Brasil, to international cables owned by Telefonica around the world.
The company may now have to turn to another planned IPO: the sale of a stake in its O2 UK unit, which Telefonica said it was considering earlier this month. This week a report suggested that Telefonica is preparing to list around 30 percent of O2 and that CEO Jose Maria Alvarez-Pallete has asked the banks coordinating the process to speed up the preparatory work with a view to listing O2 in December if market conditions remain stable.
