- Strategy: Telephony goes back in Latin America and concentrates its business in four countries
- Business.Telecommunications "in decline": the sector in line with European stock exchanges in 2019
Telefónica is presented with a plan to dispose of most of its assets in Latin America and thus achieve a business of at least 10,000 million euros. Since the company announced its claim to reduce its presence in that continent, with the exception of the Brazilian side, different options have been considered, but there is one that could meet the expectations of the multinational. The offer has come from Colombia on behalf of a group of "very powerful" Latin American entrepreneurs, as EL MUNDO has learned.
Some of the main billionaires in each country, the only ones with the capacity to make an offer to the company, have met in a consortium that proposes to create a Latin American holding that would integrate the HispAm Telephone unit, with a majority of local shareholders but with part of the shares held by the Spanish company, which would not be a majority partner within the new management company.
The holding company would be represented in each country by one or two of the different members of the consortium, large national entrepreneurs who intend to keep 51% of the business in each of the nations grouped by Telefónica HispAm: Argentina, Chile, Venezuela, Ecuador, Mexico , Peru, Uruguay and Colombia, this country from where the offer was launched. The remaining 49% would be distributed among other smaller shareholders and Telefónica itself, which would maintain around 20 or 25% of materializing this transnational proposal. In this way, Telefónica would achieve a liquidity that is estimated at "at least 10,000 million" , but on the other hand it would not leave the region, where the presence is strategic not only for the company, but also for the State.
So far, the proposal has only been communicated to the company in a first contact, and the negotiations remain for the moment in approaches. Telefónica hired Morgan Stanley to market its American unit, recently split as an independent spin off . On behalf of the consortium, the Colombian subsidiary of the firm Cremades & Calvo Sotelo has been hired, responsible for structuring it and engaging in conversations with Telefónica.
The offer from Colombia has not yet been studied in detail by the multinational. Telefónica spokesmen deny this newspaper that it has made a decision in that regard; Whatever the case, the Latin American unit will star in the news soon. Telefónica is preparing to communicate its financial results for 2019, and the HispAm branch is open to all types of operations in order to reduce the company's exposure in that geographical area, which has been ballasting financial accounts in recent times. Just a few hours before the presentation of 2018 results, Telefónica announced the sale of its subsidiaries in Nicaragua, Costa Rica and Panama, and less than a month before it had communicated that of Guatemala and El Salvador. The split of Telefónica HispAm completes the process of decoupling with that area.
The new Telefónica, less Latin
Last November, José María Álvarez-Pallete, executive president, admitted that, although "most" of his own career had developed in Latin America, "the particular conditions in these markets have impacted the evolution" of business of the company, " reducing its contribution in recent years for different reasons (macro and regulatory environment, increased competitive pressure, insufficient scale or currency volatility)". Therefore, Telefónica has carried out a spin off of these businesses, a breakdown as an autonomous unit for Argentina, Chile, Venezuela, Ecuador, Mexico, Peru, Uruguay and Colombia. Alfonso Gómez, CEO of Telefónica HispAm, depends on the new structure of Laura Abasolo , who chairs that unit in addition to serving as Director of Finance and Control for the Telefónica Group (CFCO).
Latin America has ceased to be considered a priority geography for the company, which already assumes sufficient challenges at European level. The telecommunications sector is, in fact, the one that has suffered the worst stock market behavior in the continent during 2019: the business is going through a deflationary phase, competing with the US technology giants and also facing million-dollar investments in the face of the 5G deployment, the new Mobile communications standard. In this scenario, telecos have proceeded to part with assets , especially infrastructure, and focus on the core of their business.
Telefónica in particular has focused on Spain, the United Kingdom, Germany and Brazil, a country where, unlike those in its environment, the company does manage to be profitable. On the contrary, the multinational has retreated in the rest of Latin America, despite the links with the area for 30 years.
The company closed the year 2018 with a debt of 41,785 million euros, although during the Álvarez-Pallete stage it has eased considerably. The offer launched from Colombia would significantly reduce these commitments, thanks to the 10,000 million euros that Telefónica could enter with the operation. The teleco's exposure in the territory would moderate, but it would not disappear, and the split unit could go public in Latin America, disconnected from the Madrid parquet floor.
The German and Brazilian subsidiaries of Telefónica are currently the only ones listed on the Stock Exchange, in addition to the Spanish parent company. Here, the share was left 10% of its value during 2019, the fourth steepest decline in the entire Ibex. Currently, the titles are trading at 6.15 euros.
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