Telefonica’s Blown It With Telxius IPO

Telefónica Q1'18 resultsTelefónica Q1'18 results

These are not good times for IPOs. Telefónica has been obliged to cancel the IPO of its infrastructure affiliate Telxius, with the agreement of the placement banks. With the stock market listing, Telefonica had hoped to reduce its hefty debt pile of over 52 billion euros. But market pressure has forced it to backtrack. Telefónica’s shares opened down 4% on Friday. So far this year, the shares have still lost over 8%.

In a statement to the Stock Market Regulator, the operator said it had decided to call off the IPO, “because we do not consider that the valuation given to Telxius, implicit in the buy orders we have received, is adequate.” Telefónica confirmed that it will continue to analyse strategic alternatives for this asset.

According to some market sources, a great deal of orders from some investors had been pulled in the last few hours. In fact, the offer had still not been fully subscribed due to investors’ doubts over the performance of the underwater cables business, market sources say.

The Telxius IPO was scheduled for October 3 and, as of Wednesday, the demand for shares was concentrated at the low end of the initial price range, namely 12,5 euros.

Telefónica had planned to list 36.6% of Telxius, with the possibility of extending this to 40%, valuing the Company at 3.7 billion euros. Goldman Sachs, J.P Morgan, BBVA and CaixaBank are the placement banks.

Telxius has two business lines: the management of 65,000 kilometres of underwater cable, which accounted for 57% of profit in 2015. Then almost 16,000 telecommunication towers, 66% of which are in Spain and which account for the remaining 43%.

Amongst this company’s strengths, analysts highlight its relationship with Telefonica, which guarantees 65% of its revenues. This nexus is based on long-term contracts which allow for additional expansion in the telecommunication towers business, as well as increased volume in the underwater cables activity. This relationship also ensures Telxius has recurrent and visible revenues and cash generation.

 

About the Author

Francisco López
Working for more than 25 years in the world of journalism and communications, Francisco has gained valuable experience at several well-known newspapers such as El Mundo and La Vanguardia. He specialized in economic and financial news before making the leap to the corporate communication sector where he has held several positions: Adviser to the Ministry of Economy, Director of the Bank of Spain’s Communication Department, in addition to his consultancy role at Analistas Financieros Internacionales, where he currently works.