Telefonica Sells Telecommunication Towers to American Towers for $9.4B

Telxius Telecom, a subsidiary of Telefonica, has sold its telecommunications division to American Towers for €7.7 billion ($9.41 billion), payable in cash.

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Telefonica (TEF) wants to focus on reducing its debt and is actively managing its portfolio to create value. According to Telefónica President José María Álvarez-Pallete, “this is a deal that makes strategic sense within our roadmap.”

The agreement includes the sale of approximately 30,722 phone towers across Europe and Latin America. Telefónica Group operators will continue to lease the towers at similar terms to current agreements so that these operators can continue to provide their services.

American Tower will become Telefónica’s leading supplier in both Europe and Latin America, and maintains its status as a partner in strategic projects in Brazil, Argentina and Colombia. (See TEF stock analysis on TipRanks)

UBS analyst Giovanni Montalti reiterated his Hold rating on TEF last month, lowering his price target to $4.76. This implies upside potential of around 7% from current levels.

Montalti believes that the company will be forced to cut its dividend in the foreseeable future due to lower expectations for operating free cash flow.

Consensus among analysts is a Hold based on 2 Hold recommendations. Montalti was the only analyst to offer a price target for the stock in the last three months so his price target of $4.74 makes up the Street’s consensus.

TipRanks’ Smart Score tool shows that Telefonica scores a 6, indicating that the stock is likely to perform in line with market averages.