5 times Ebitda and maintain its rated bbb

Telefónica is bulimic. In the space of two years, the Spanish operator conducted an extensive campaign of acquisitions. Redemption of mobile assets of American Bellsouth in Latin America, primarily from O2, first operator in Britain, fourth in Germany and Czech Cesky Telekom and second in Ireland. In total, he spent almost EUR 35 billion in cash in these operations. By purchasing O2 to 26 billion euros a year ago, Spanish has signed the largest buyout in telecoms in Europe since that of Orange by France Telecom in 2000. Fearing to see back the excesses of the bubble, markets have then sanctioned Spanish, alleging that he to overpay an asset situated on mature and highly competitive markets. This operation has, in addition, reduced visibility on the Group's strategy, and the fear of new acquisitions has been given on the title.

In the spring, Telefónica therefore tried to reassure investors, closing the door to large acquisitions by end 2007 (apart from possibly the acquisition of 50 that it does not hold in its Brazilian subsidiary). "We wanted to have a critical mass in Europe and Latin America, and we 've", justified Cesar Alierta, President and CEO of Telefonica.

In any event, the financial flexibility of the operator is currently limited. End of June, its total debt (including all commitments) stood at 58.2 billion euros, or 2. 93 times its gross operating surplus (Ebitda).

Possible assignments

Yet Telefonica has set a goal in the medium term to reduce its debt less than 2.5 times Ebitda and maintain its rated "bbb ". "This prompted him to announce that it endetterait more and sell its stake in TPI subsidiary of directories for EUR 1.8 billion", said Morgan Stanley. In addition, the operator is committed to issuing no new action to make acquisitions.

But this flexibility could quickly improve. "The year 2007 could thus be devoted to debt reduction, while in 2008 the operator will be able to afford new investments," says the Bank. In the absence of other acquisitions, Morgan Stanley believes that debt rise to 2.4 times Ebitda end 2007 and 1.9 times end of 2008.

According to the Bank, Telefonica could increase its debt of 12 billion euros in 2008 without jeopardizing its debt ratio. Moreover, it could get rid of some assets considered non-strategic. His interests in cable television operator Sogecable (16), the world leader in the production of entertainment Endemol (75) or in the operator Portugal Telecom (10) are currently valued at more than 3 billion euros on the stock exchange. What revive speculation about new operations.

Among the potential targets, Morgan Stanley cited the Austrian Telekom Austria, Greek OTE (of which one or the other would allow the Spanish to strengthen in Eastern Europe), German E-Plus (to achieve critical mass in Germany) or even Bouygues Telecom.

The acquisition of the third French mobile operator would allow it to establish a foothold in the hexagon and complement its mobile coverage in Europe. Bouygues has always denied wanting to sell its telecoms subsidiary, but the market anticipates the diversification of the Group of construction in nuclear power after his recent participation in Alstom.