Telefonica Colombia will generate capital of around €1.8 billion as it attempts to write down debt as well as settle a fine issued to it earlier this year.
Colombia Telecomunicaciones, in which Telefonica holds a 67.5% stake, will contribute €1.2 billion of the capital. Reportedly, the remaining amount will be covered by the Colombian government, which holds a 32.5% stake in Telefonica Colombia.
Its partnership with Telefonica notwithstanding, in July the Colombian government issued the firm’s local unit Movistar, together with fellow operator Claro, a fine of a combined COP4.8 trillion (€1.3 billion). The penalty was imposed after an arbitration tribunal found that both firms had violated network licensing agreements.
Telefonica will reserve €472 million of the raised capital in order to pay off this fine, with a further €1.37 billion will be used to pay off its creditor, the pension fund and asset manager PARAPAT.
A statement from Telefonica read: “in relation to the arbitration award rendered in Colombia on 25 July regarding the reversal of certain assets linked to the provision of mobile voice services under former concessions, Telefonica and the government have agreed to perform a capital increase – proportional to their respective equity stakes – amounting to around €472 million, in order to meet the above payment.”
However, the firm also made clear that it considers the ruling “not adjusted to law, unfair, disproportionate and arbitrary”, adding that “in this sense, Telefonica reserves all of its legal rights and the exercise of any applicable legal action”.
The group also noted that raising the capital would not have a major impact on its finances, stating that it was shoring up “the financial position of Telefonica Colombia, which, coupled with the investments made in recent years, allows the company to undertake a new phase.”
Telefonica is the second largest operator in the market with a 25.6% market share. It is notably ahead of Millicom (15%) but significantly behind Claro (60%).
