Spain’s Telefonica said on Thursday it was in talks to acquire up to $6.0 billion in Latin American operations from U.S. telecoms company BellSouth Corp, muscling further into the booming regional markets.
Telefonica, the largest telecoms operator in the Spanish-speaking world, has long focused on Latin America as its key to growing the company. It said in a statement that it could not estimate when talks might conclude and said it was impossible to set a price on the assets at this stage.
Analysts expect BellSouth to sell its Latin American mobile operations to help fund its share of a $41 billion acquisition of AT&T Wireless Services Inc.
Analysts noted Telefonica, which has relatively less debt than European peers, could swallow the cost without substantially damaging its balance sheet.
However, Spanish financial dailies Expansion and Cinco Dias, citing sources familiar with the situation, said Telefonica was not the sole bidder for the assets but its talks were the most advanced.
Expansion said that Telecom Italia and Latin America’s top wireless telephone service provider, Mexico’s America Movil , were also chasing the assets.
TIM, the mobile arm of Telecom Italia which is present in several Latin American countries, had no comment. America Movil could not be reached for comment.
Telefonica shares slid 0.5 percent to 13.09 euros at 1235 GMT after the talks were confirmed, eroding a 13 percent gain so far this year to Wednesday’s close.
Telefonica’s 92-percent controlled mobile unit Telefonica Moviles, which company sources said was likely to be the vehicle for the bid, fell 0.8 percent.
The acquisition would confirm Telefonica, Europe’s third-largest telecoms operator by market valuation, as one of the top operators in fast-growing Latin America and extend its position in countries where it has a minimal presence such as Venezuela, Colombia or Ecuador.
BellSouth said on Thursday it has wireless operations in 10 Latin American countries with approximately 10.5 million customers, but would not comment on the talks. BellSouth reported consolidated sales for its Latin American wireless businesses of $2.3 billion in 2003 and EBITDA of $696 million.
One of the jewels in its Latin American crown is Venezuela, where it owns a 78 percent stake in Telcel BellSouth, a mobile phone, Internet and data service provider.
Telefonica Moviles has some 30 million wireless clients in Latin America, with the majority of these in Brazil.
Some analysts’ cautioned the deal may be difficult to close due to the high number of minority shareholders in BellSouth’s Latin American subsidiaries and due to possible regulatory issues in some countries.
“BellSouth’s Latam coverage is very extensive... A combination would create a giant in the sector and would probably be a complex operation for the companies to perform,” said one pan-European equities trader.
Analysts said BellSouth needs to raise funds after its Cingular Wireless joint venture with SBC Communications agreed to pay $41 billion to acquire AT&T Wireless, the third-largest U.S. mobile operator.
Telefonica bonds, meanwhile, were hit by talk of the acquisition, although analysts noted the Spanish company was relatively less reliant on debt than its competitors.
“Such is the financial strength of Telefonica that we expect it could afford to pay out 4 billion euros in cash without necessarily damaging its credit profile or rating,” Dresdner Kleinwort Wasserstein said in a note before the talks were confirmed.
Telefonica is rated A3 by Moody’s Investors Service and A by Standard & Poor’s, both in the middle of investment grade.
