Telefonica Mulls $2.4 Billion Submarine Cable Sale: Expansion

Telefonica SA has begun talks with international investors to sell its submarine-cable network, Expansion reported citing unidentified market sources.

The Madrid-based company hopes to value the business at about 2 billion euros ($2.37 billion), or as much as 10 times the unit’s earnings before interest, taxes, depreciation and amortization, according to the sources. Profit before items for the underwater-cable business are slightly above 200 million euros, they said.

The network was part of Telxius, the company’s main telecommunications-infrastructure unit, which has been integrated into Telefonica Tech. The company has been weighing selling the business as a way to ease its debt burden.

Telefonica Chief Operating Officer Angel Vila alluded to this possibility during the third-quarter earnings call with analysts. Vila said that the Telxius cable business had renegotiated with Telefonica subsidiaries its contracts finishing in 2020 and 2021. Telxius signed five-year contracts in exchange for a substantial cut in fixed prices, Vila said.

While new contracts affect income over the short term, they will provide security and growth over a longer period, he said. “That long-term visibility will allow Telxius to contemplate all possible alternative strategies for its underwater-cable unit.”

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