Telefonica Cleans Up Balance Sheet with Colombian Merger

Spain’s Telefonica has struck a deal to merge its Telefonica Moviles Colombia unit with Colombia Telecomunicaciones, a company itself majority owned by Telefonica, the company says. A key catalyst for the merger is Telefonica’s attempt to cement its balance sheet, which would see a reduction in net debt of EUR1.3m ($1.7bn), Telefonica says. The merger will result in Telefonica controlling 70% of the merged entity with the Colombian government holding the remaining 30% stake, with a right to increase that stake by 3% in 2015. Currently Telefonica owns a 52% stake in Colombia Telecomunicaciones with the government holding the rest. As planned, the deal would involve the Colombian government assuming its 48% share of the telecom company’s debt obligations and extending the payment date of other outstanding debt held by the Patrimonio Autonomo Receptor de Activos, Parapat, until 2028. Officials at Telefonica in Madrid could not comment further on the transaction. The merger will become effective once shareholders from both companies vote on the plan on April 24th.