TEF Telefonica SA

By Carlos López Perea and David Román 

MADRID--Spain's Telefónica SA is preparing a possible sale of non-core assets worth EUR5 billion-EUR6 billion ($5.43 billion-$6.52 billion) including telephony towers, a person close to the situation said Tuesday.

The well-flagged move, first announced by Telefónica officials in November, would look to help the telecom company cut its debt pile, which currently stands at EUR49.7 billion--slightly above the company's market value.

Telefónica is trying to complete the $14 billion sale of its O2 U.K. unit to rival CK Hutchison Holdings Ltd., which is now being reviewed by the European Commission. The company is aiming to seal the deal in the second quarter, but analysts have expressed concern that Europe's top antitrust regulator may set stringent conditions on the sale, effectively making it less profitable for Telefónica.

Telefónica officials have previously said that they are considering alternatives to raise additional funds in such case, also including a possible listing of the company's Mexican unit. The person close to the situation said the company hasn't yet decided which specific assets may be sold or listed, adding that any move would take place in coming months.

Telefónica has often signaled its strategy is now focused on cutting debt while maintaining a strong dividend policy that is a top draw for institutional investors such as pension and investment funds.

In a recent note to investors, analysts at Bankinter said that, if the O2 deal is scrapped, Telefónica may be forced to switch from a cash dividend to a less appealing scrip dividend, to be paid in company shares.

Write to Carlos Lopez Perea at carlos.perea@wsj.com and David Roman at david.roman@wsj.com

(END) Dow Jones Newswires

January 12, 2016 04:13 ET (09:13 GMT)

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