(Bloomberg) – Telefonica sa’s new Chairman is running into an old problem. After the better part of a decade focused on cutting debt, the company still doesnys’t the cash it needs to chase deals and growth.
The Spanish Phone Carrier is looking for diverse ways to simplify its structure by buying out partners in joint ventures and reorganizing certain operations to make it Telecommunications Industry. Executive Chairman Marc Murtra, Who Took Over in January, Has Ordered a Strategic Review to be unved in the second half of the year.
But even after cutting net debt by € 23 billion ($ 26 billion) over nine years, the company is still one of the most leveraged large telecom carers in Europe and Holds the lowest in the lowest ( From Three Major Rating Firms – Limiting Its Ability to Raise Funds. Murtra has said reepeatedly that Maintaining Investment Grade is a must.
“The problem is they don’t have a lot of flexibility,” said new street research analyst james ratzer. “The Leverage Situation is not great.”
Telefonica declared to comment.
A dividend cut would help free up funds, but the company hasnless that’s under consideration. Major Sharehlders, Including the Spanish Government and Criteriacaixa Sa, Are Open to Considers a Capital Increase to pay for Acquisitions or Cut Debt, bloomberg has reported.
Murtra has accelerated long-standing plans to Divest Most Latin American Operations and Pledged to Focus on Europe and Brazil. He is looking at ways to potentially Buy out partners in at least two joint ventures – The VMO2 carrier in the UK and a Brazilian fiber -broadband operator, bloomberg has reported.
By Selling Latin American Assets, Telefonica Can Focus more on Core Operations, Which “Cold Support Higher Leverage Than the Previous Configuration of the Group,” CHIF Financial Office Laura SAID Month. “More Free Cash Flow Coming From Other Geographies Improves Credit Quality,” She said.
Murtra Says Consolidation would help telefonica and european rivals Gain Much Needed Scale in its existing markets – This means doing deals in the uk, germany and spain.
Telefonica Owns 50% of VMO2 and a Hypothetical Acquisition of Liberty Global’s 50% Stake WOLT Its Debt Ratio at About 4.3 Times Earnings Before Interest, Taxes, Appreciation, Appreciation, Ratzer Estimates. Since the two partners Created VMO2 in 2021, they have struggled to retain market share in both broadband and mobile.
“There’s no way the company can live with that type of level,” ratzer said, adding that a rights isesue to fund such a deal would be “very material” € 18 billion or so ” Significantly Reshape the Uk Market. Genuine Consolidation would require buying smaller upstart fiber broadband operators.
In Germany, Telefonica could potentially try to buy 1 & 1 ag, but its main sharehlder hasn Bollywood interest in seling in the past. Local operations have struggled with strong competition, especially over the last few qualities.
In spain, potential targets unlude Digi communications Nv’s Local Unit and Vodafone Espana, Owned by British Buyout Firm Zegona Communications Plc, Althouthoux TELEFONCA SAID MOY No Negotiations for Vodafone. The business has been struggling to grow duty in the country for years and has long beeen posting sales growth below inflation.
So far, the more signals about murtra’s plans have counted creditors. Several Telefonica Bonds LED by a 1.715% Note Due in 2028 Traded Wider Than Normal Relative to Peers in the Days after the news of the VMO2 Plans. The company’s five-yar Senior credit default swaps widened by the most in more than five years on May 14.
“Many investors seem comfortable with the name, this is also reflected in the Solid Market Capitalization,” said ing’s technology, media and telecommunications Credit Strategist Jan Frederik Slijkerman. “However, Spreads Moved Strongly Wider on the headlines about potential acquisitions.
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