Telefónica eyes sale of O2 Ireland operation

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Telefónica is mulling a potential sale or merger of its Irish business after receiving expressions of interest from potential buyers.

A sale of O2 Ireland, the country’s second-largest mobile group, which is not officially being pursued, could raise as much as €700m for the heavily indebted Spanish telecoms company.

Telefónica admitted in its results presentation last month that it would continue to pursue asset sales as part of its debt reduction target.

Telefónica has received “expressions of interest” in the Irish mobile operator, according to one person with knowledge of the situation. He added that the group was willing to consider the offers.

Interested parties include Hong Kong’s Hutchison Whampoa, which already owns the rival Three mobile business in the country, although there would be questions over whether such in-market consolidation would be allowed by regulators.

Another informed person cautioned that there was no sale process, and no guarantee that Telefónica would seek a deal.

However, many analysts have long seen the Irish operation as available for acquisition given its non-core status within a group that is looking to sell off less profitable parts of its business.

Telefónica and Hutchison Whampoa declined to comment.

Telefónica wants to reduce its debt to below €47bn by the end of the year from more than €51bn, a target that analysts have questioned without sales.

Ángel Vilá, Telefónica’s chief financial officer, responded to questions about disposals at its results presentation two weeks ago by saying that it was “actively” managing its portfolio. He said that the group could reduce debt “inorganically” – indicating asset sales – as well as through the use of free cash flow.

He said Ireland would “benefit from in-market consolidation” but would not be drawn on any deal. He added: “We don’t want to create uncomfortable situations in our operations . . . We are not in an expansion mode but, yes, we can be in a strengthening mode in some of the markets where we operate. Some of those markets could benefit from in-market consolidation.”

Telefónica has been actively selling other non-core operations, including a 40 per cent stake in its Central American operations for $500m in April, although it is under less pressure than it was a year ago given the influx of cash from sales and cuts to its dividend.

The group has been linked with other potential disposals by analysts, including a sale of its Czech business and a listing of its Colombian operations, although it has pulled back from plans for a flotation of a partial stake in its Latin America business.

One informed person said that the group was also less willing to strike a deal with KPN in Germany.

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