Telefonica likely to keep O2 IPO on ice through UK spectrum auction
Telefonica [BME:TEF] is likely to keep its planned O2 IPO on ice throughout a UK spectrum auction, said a banker and a person familiar with the situation.
In November, Ofcom, the UK telecoms watchdog, announced the auction of 190 MHz of spectrum in the 2.3 GHz and 3.4 GHz bands. This represents an increase of around one third of the total mobile spectrum currently available, Ofcom said, without providing details of the timing.
The next step in the process will be the publication of the details of the auction early in the European summer, said a second person familiar with the situation. If everything goes according to plan, the auction will be held in the second half of the year, this person said.
However, previous spectrum auctions have been delayed by litigation and the threat of litigation, the person said. Although Ofcom hopes to avoid delays, it is difficult to please everybody in the market, the person added.
The planned O2 IPO is ready to go if Telefonica sees a window, said the first person. But, Telefonica has no intention of listing its British unit in the near future, the person said, adding that the spectrum auction and Brexit are both risk factors.
The IPO would be much easier to execute following the spectrum auction, said the first banker. Telefonica needs to remove as much risk as possible from the sale of shares, the banker said, adding that the entry of anchor investors and a credible dual-track process would both be helpful.
Even so, an IPO this year is still possible if Telefonica can line up all its ducks, the first banker said. A better than expected macro-economic situation means that the IPO could be held this year, a second banker said, adding that his team is “very optimistic” about a 2017 listing.
The uncertainties surrounding Brexit mean that the IPO remains a tough sell, the third banker said. Telefonica has been looking at reducing the risks of a sale, this news service reported in January. A previous takeover of O2 by CK Hutchison [HKG:0013], valued at GBP 10.3bn (EUR 11.94bn), was blocked in May, as reported.
Spokespeople for Telefonica and Ofcom declined to comment.