Telefonica Offloads Europe, LATAM Tower Sites To American Tower In $9.4B Cash Deal

Spanish telecom company Telefonica S.A. (NYSE: TEF) announced Wednesday that it has entered into a tower sale agreement via its subsidiary Telxius Telecom S.A., with broadcast communications infrastructure operator American Tower Corp (NYSE: AMT). The deal is valued at €7.7 billion (roughly $9.38 billion), payable entirely in cash.

What Happened: Telefonica has agreed to offload its telecommunication towers in Spain, Germany, Brazil, Peru, Chile, and Argentina to American Tower. The companies will enter into two separate transactions, one for the European assets and the other for the Latin American assets, collectively covering 30,722 tower sites.

One of the deal’s terms is that the Telefonica Group will retain its current leasing agreements with its subsidiary to ensure consistency in services.

Why Does It Matter: According to Reuters, Telefonica sold 10,100 phone masts in Germany to Telxium for €1.5 billion. In comparison, Telxius’ generated an operating income before depreciation and amortization of €190 million from its tower business in the past 12 months.

Completing the sale will cut down Telefonica’s net financial debt by roughly €4.6 billion. The financial leverage ratio is expected to dip by 0.3x times and generate a capital gain of approximately €3.5 billion.

President of Telefónica, José María Álvarez-Pallete said that Telxius and American Tower were the company’s leading suppliers. After the sale, American Tower will hold the top spot as the leading supplier in the European and Latin American region and play the role of a partner in strategic projects across Argentina, Brazil, and Columbia.

Price Action: TEF shares are trading higher by 9.23% in the pre-market session on the last check Wednesday.

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