Telefónica reveals buy-out plans for mobile unit

Telefónica, the Spanish telecommunications group, on Thursday ended months of speculation by revealing plans to buy out minority shareholders in its separately-listed mobile telephony unit.

The company said it would swap shares in the parent company for the 7.5 per cent of Telefónica Móviles it does not already own, at a rate of four for five.

At the time of the announcement, the deal valued the subsidiary’s shares at €10.64, compared with the €11.12 at which they were suspended on Thursday after surging more than 6 per cent. They later eased to €10.63, ahead 1.3 per cent on the day. Shares in the parent group, meanwhile, were down nearly 1 per cent.

In a statement to the stock market regulator, Telefónica said it planned a capital increase of up to 261.3m shares, or 5 per cent of the total, although much of this could be drawn from its own treasury stock. It said the share-swap rate was “still subject to valuation reports which would be presented to the boards of both companies” later this month.

The proposal is the latest move by the Spanish company to simplify its structure. Last year it bought out minorities in Terra, its internet service provider, after earlier divesting Lycos.com, its loss-making US portal. Telefónica has also signalled that TPI, its directories business, could be sold.

Telefónica Móviles a year ago completed the US$5.8bn acquisition of BellSouth’s Latin American assets, while the parent company last year expanded in Europe with the purchase of Cesky Telecom of the Czech Republic and O2, the UK mobile operator.

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