Telefonica Selling Irish Mobile Unit to Hutchison for $1 Billion

on Jun 24, 2013

Telefonica SA (BMAD:TEF), the indebted Madrid-based telecoms group, had agreed to sell its Irish mobile business to Hutchison Whampoa’s Three Ireland, Reuters reported on Monday, June 24. The deal, which is subject to regulatory approval, is worth €780, with an additional deferred payment of €70 million if certain financial targets are achieved.

The Telefonica share price was down 0.66 percent at €9.73 as of 10.51 GMT in Madrid.
**Ireland’s No 2**
Under the deal, Three Ireland owned by Hutchison Whampoa will take over Telefonica’s O2 Ireland and increase its market share in the country to 37 percent. This will make Three Ireland the second largest mobile carrier in the country behind Vodafone (LON:VOD). The combined carrier will have 120 stores and 1,300 staff in Ireland, Reuters noted.

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The Irish deal is yet another step in Hutchison’s drive to improve its position in mobile telecommunications in Europe. Over the past decade, the Hong Kong-based investment holding company has built a presence in six European markets such as Britain and Italy but has struggled to make a profit because it remains smaller than domestic rivals. Seeking a solution, Hutchison bought last year Orange Austria and is entering merger talks with Telecom Italia over its local unit 3 Italia.

**Telefonica’s debt**
!m[LON:VOD, BMAD:TEF](/uploads/story/3332/thumbs/pic_1_inline.jpg)
The sale of O2 Ireland is the latest in a series of non-core asset disposals at Telefonica aimed to reduce the company’s debt. Hit hard by the tough economic conditions in Spain where 27 percent of the workforce is unemployed, the telecom has amassed a mountain of debt, which stood at the staggering €52 billion at the end of March. Telefonica, which aims to cut debt to €47 billion by the end of the year, sold some Central American assets for $500 million in March and according to analysts, it could consider selling its business in the Czech Republic as well.

According to analysts at Espirito Santo, the deal was a good move for Telefonica despite the 10 percent discount to the fair value of O2 Ireland because the business was small and not crucial for the company. “This should enable Telefonica to reduce its leverage by approximately 1 percent at the end of 2013,” the analysts said in a note, as quoted by Reuters.
**The Telefonica share price was €9.68 as of 12.12 GMT, 24.06.2013**