Telefónica is seeking acquisitions to expand its technology business

Written by Clara Lyla Lodet

MADRID (Reuters) – Chief Operating Officer Angel Villa said on Thursday that Telefónica will seek acquisitions to expand its newly formed technology business division after the Spanish company published first-quarter results that are in line with expectations.

Telefónica, like its European competitors, has faced growth problems, as well as the impact of the Covid-19 pandemic. So it was selling assets to pay off debt and finance the upgrade to 5G networks.

The company wants to extract value from the Internet of Things (IOT), big data, cloud services, and cybersecurity services provided by the fast-growing company Telefónica Tech. “We are looking at acquisitions to complement both the reach and capacity of our IOT Tech unit and we will occupy more areas in our markets … such as Brazil,” Villa told Reuters.

Telefónica’s total first-quarter profit was 3.42 billion euros, in line with analysts’ average forecasts of 3.36 billion euros.

The company’s vice president of finance, Laura Abasolo, said selling Telxius mobile phone antennas to American Tower would allow Telefónica to reduce net debt by 9 billion euros in the next quarter – but about a billion would go to future leases.

Likewise, much of the cash generated during the quarter was allocated to spectrum auctions in the United Kingdom, Spain and Chile, although Villa said the costs of the British spectrum were lower than expected.

Investments in radio frequency, which is essential to building connectivity in the race to spread the latest 5G mobile data, have cost Telefónica € 694 million.

“The auctions in Spain and Brazil have yet to come, but the spectrum purchases in the UK have brought security,” Villa told analysts, adding that cost control helped the British companies’ performance.

“We hope (this performance) will continue thanks to the synergies resulting from our joint ventures,” said Villa, referring to the merger agreement between Virgin and O2.

(With additional reporting by Isla Benny and Jesus Aguado)