Telefonica Denies Rumors of AT&T Takeover Offer


Telefonica S.A. (NYSE:TEF) (MCE:TEF) denied all rumors on Monday that American telecom giant AT&T Inc. (NYSE:T) has approached to buy it for 70 billion euros ($93 billion). The Spanish telecom operator’s statement comes after a Spanish newspaper El Mundo reported that AT&T Inc. (NYSE:T) has expressed its interest in Telefonica S.A. (NYSE:TEF) (MCE:TEF), but Spanish government vetoed the offer citing national strategic reasons.

Telefonica Denies Rumors of AT&T Takeover Offer

Citing sources familiar with the matter, El Mundo said Monday that AT&T Inc. (NYSE:T) has also proposed to take on Telefonica S.A. (NYSE:TEF) (MCE:TEF)’s 52 billion euros of debts. It further added that Spanish government has the right to veto the sale of any company that the government considers strategic to the Spanish economy. Telefonica S.A. (NYSE:TEF) (MCE:TEF) has about 316 million customers in 24 countries.

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After the newspaper report, Telefonica S.A. (NYSE:TEF) (MCE:TEF) shares surged as much as 3.9 percent. The Spanish company has been hit by the deep recession across the Eurozone. The company is selling or spinning off its business units to reduce its debt burden. Last year, Telefonica S.A. (NYSE:TEF) (MCE:TEF) lost more than 3 million of its customers in Spain alone.

M&A In European Telecom Industry

Despite the poor economic environment in Europe, the region has been a hot spot for mergers and acquisitions in communications industry. Liberty Global PLC (NASDAQ:LBTYA) (NASDAQ:LBTYB) recently acquired Virgin Media Inc. (NASDAQ:VMED) for $16 billion. It also purchased a 13 percent stake in Ziggo NV (AMS:ZIGGO), a Dutch cable operator. Carlos Slim Helú’s  América Móvil has purchased cellphone operator KPN in Netherlands and Telekom Austria.

Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) too is pitching for several deals. Most notable of them is the sale of its 45 percent stake in Verizon Wireless to its American partner Verizon Communications Inc. (NYSE:VZ), which is valued at about $100 billion. The British telecom giant has also expressed interest in buying the largest cable operator in Germany, Kabel Deutschland Holding AG.

Telefonica Reduces Its Debt Pile

Telefonica S.A. (NYSE:TEF) (MCE:TEF)’s huge debt pile, coupled with Spanish economic woes, has raised concerns about how it will service its debts going forward. But a number of divestments have eased those concerns. Telefonica S.A. (NYSE:TEF) (MCE:TEF) spun off its German unit Telefónica Deutschland last year in an IPO, raising $1.9 billion. The company has also exited its position in China Unicom, which was worth about $1.4 billion, according to Mark Scott of the New York Times. Telefonica S.A. (NYSE:TEF) (MCE:TEF) has also cancelled its dividend payment in 2012. The company aims to bring down its debt from 52 billion euros to 47 billion euros by the end of this year.

American shares of Telefonica S.A. (NYSE:TEF) (MCE:TEF) were up 3.61 percent to $13.76 at 11:00 AM EDT.

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