Spanish telecoms incumbent Telefonica has agreed to sell a 40% stake in its Central American subsidiaries to Corporacion Multi Inversiones (CMI), a Latin American industrial group, for a fee of $500 million.
The operator is to spin off operations in El Salvador, Guatemala, Nicaragua and Panama and manage them in a separate unit in which it will retain a 60% controlling stake.
Telefonica (Madrid, Spain) is due to receive a further payment of $72 million from CMI depending on the “operational performance of the aforementioned assets in the coming years”.
The divestment marks the latest effort by the operator to reduce Group debts from €51.3 billion ($67.9 billion) in 2012 to less than €47 billion in 2012.
According to a report from the UK’s Financial Times newspaper, Telefonica is thought to be considering sales of assets in Ireland and the Czech Republic and is also mulling a possible listing of its business in Colombia.
The price paid by CMI (Guatemala City, Guatemala) works out at about 6.5 times the subsidiaries’ earnings before interest, taxation, depreciation and amortization in 2012.
In a statement, Telefonica described the sale as part of a “policy of proactive management of its asset portfolio and the initiatives to increase the company’s financial flexibility”.
The operator was also quick to emphasize its commitment to the region, noting that it has been active in Central America since 1998, when authorities in El Salvador began to privatize the telecoms sector.
Last year, Telefonica reported a 23.8% year-on-year increase in revenues from its Central American businesses, to €672 million, although operating income before depreciation and amortization declined by 15.3%, to €140 million.
Telefonica said it has continued to invest in the region and that its deal with CMI will offer “the opportunity to continue business development in the markets where both companies will work together”.
CMI was formed in 1920 and says it operates in 19 countries on three continents.