Spanish telephone company Telefónica (BME: TEF) announced this week in a letter to from the CEO that it intends to spin off its Spanish-language Latin America operations in order to focus on business in Spain, Brazil, Germany and the United Kingdom. According to the company in a statement shared with Finance Colombia, this is to reduce exposure to “inherent macroeconomic and currency volatility. In Colombia, Telefónica operates the Movistar brand of telephony, cable TV and internet access.
Telefónica operations in Argentina, Chile, Peru, Colombia, Mexico, Ecuador, Uruguay & Venezuela Will be rolled up into the new “autonomous unit.”
“Our operations in Latin America were the growth engine of the company until a few years ago. However, the particular conditions in these markets have had an impact on the business, reducing its contribution in recent years for different reasons and despite the enormous efforts of our local teams, which have always shown a strong commitment,” said Telefónica Chairman & CEO José Maria Álvarez-Pallete.
According to Telefónica, “With this operational spin-off, Telefónica begins a strategic review of its portfolio in Hispam with the double objective of modulating the exposure to the region, while creating the conditions to maximize its value via growth, consolidation and possible corporate transactions.” In other words, Telefónica’s non Brazil Latin American operations are for sale.
Alfonso Gómez, currently responsible for Telefónica’s “Hispam Norte,” region will lead this new unit, with Álvarez-Pallete citing his extensive experience in the telco sector in the Latin American market. He was responsible for the recent network deal in Mexico, for the sale of the Central American units and for the successful restructuring of Colombia Telecom (Movistar) while he was CEO. Aligned with the new strategy, this unit will report to Telefónica’s Finance and Control business unit, led by Laura Abasolo.
The Spanish telecom also announced creation of Telefónica Infra, an infrastructure unit to operate towers, antennas, data centers and fiber optic lines, and Telefónica Tech to focus on cybersecurity, cloud computing, IoT and Big Data.
According to analysts, Telefónica’s non Brazil Latin American operations could be worth $13 billion dollars, with Colombia accounting for $3.3 billion USD of that amount, not accounting for debt.