Telefonica is having difficulty raising finance for its Colombian arm due to a difference of opinion with its partner in the business, the Colombian government.
Telefonica Colombia requires more capital to buy spectrum in the country’s upcoming 4G…
Telefonica is having difficulty raising finance for its Colombian arm due to a difference of opinion with its partner in the business, the Colombian government.
Telefonica Colombia requires more capital to buy spectrum in the country’s upcoming 4G auction and to reduce its pension liabilities, according to the Spanish giant’s head of Latin America.
Santiago Fernandez Valbuena told Bloomberg that Telefonica had not decided how it wanted to raise the cash and that this would largely be down to what the government was happy with, but that finding a solution was proving difficult.
Telefonica, which holds 70% of the business, had considered a rights issue to inject funds into the operator. However, Fernandez Valbuena said the government was reluctant to dilute its 30% stake.
The telco, which operates as Movistar, lags behind America Movil’s Claro in Colombia’s wireless market. The government is looking to rein in Claro’s 60%+ market share in the 4G auction, to be held on 26 June. AMX will be restricted in what licences it can bid for to prevent further consolidation and to put its rivals in a relatively stronger position.
Telefonica, which controls around 25% of the market, would not be required to pay for any licences it won until three months after the tender. In the interview Fernandez Valbuena said the auction would likely generate good returns, but that Telefonica’s participation relied on having enough funds to compete. Furthermore the telco also has a US$1.5bn deficit in the unit’s pension fund to address.
The Spanish group had looked to float its Latin American business in a single unit to cut its significant debt pile, but that was shelved due to market conditions and because it found cuts elsewhere. Fernandez Valbuena said a lot of the legal and tax steps for an IPO had already been taken, so it could be revisited at a later date. Telefonica wants to cut its debt by more than €4bn this year to below €47bn.
