Telefónica Brasil has obtained the initial green light from the regulator to carry out a capital reduction of more than 960 million euros. It was the essential regulatory step to be able to carry out this measure within the subsidiary’s shareholder remuneration strategy. Now, the Spanish operator, which controls almost 75% of the shares of this subsidiary listed in Brazilian territory, has this weapon to complete one or several transactions over the next few years. This is in addition to the different dividends approved in recent quarters, which allow this division to contribute money to the holding company’s cash.
In the middle of last February, Telefónica approved in council to ask the regulator for permission to keep it up its sleeve: carry out a capital reduction in one or more phases. The objective was to “grant the flexibility” to the operator to execute these for a maximum value of measures of 5,000 million reais, which in exchange represents 964 million euros. The reductions could be made through the reimbursement of funds, as reflected in the relevant fact published on the 17th of that month.
This authorization was unanimously approved during the session of the board of directors of the Brazilian telecommunications regulator (Antel) held last Friday, as the company has just informed shareholders in another relevant event. This is prior notification. The ‘fine print’ and whether it has been approved with a series of prerequisites is not yet known. But beyond those details, the reality is that it has this letter within the shareholder remuneration policy.
This procedure only implies reserving this possibility for the future. The operator has no obligation to carry out the reduction, which will also require specific subsequent approval from the board of directors. This reimbursement of funds would be made “in proportion to the shareholding on the respective dates on a fixed basis and without cancellation of shares.” In practice, it acts as a kind of dividend distribution among shareholders.
Some analysts are already considering the possibility that these reductions will be carried out throughout this year, with the possibility of an execution in two phases, with the last one in the first part of 2024. Telefónica Brasil shares, which are listed on The Latin American country rose by mid-afternoon this Monday by more than 2.5% to 44.3 Brazilian reais (8.55 euros at the exchange rate). So far this year, the securities have appreciated more than 20%.
Telefónica Brazil distributed almost 90 million in dividends (capital taxes) in two batches in July and August
This is not the only measure taken by Telefónica Brasil to remunerate the shareholder. Precisely last Friday, it announced the board’s approval of what is known in local regulations as juros on equity capital, which in practice is a dividend. In total, 200 million gross reais (more than 38 million euros at the real exchange rate) will be distributed. In mid-August they did the same and the amount was 265 million reais. These amounts are added to the 2,100 million reais (more than 400 million euros) that had been distributed until the end of the first quarter between pure dividends, share repurchases and those swears.
Telefónica, largest shareholder
The listed Brazilian subsidiary is controlled by the parent company of the Spanish operator. 74.7% of the company’s shares are controlled mainly by the parent company and the Latin American holding company. The rest, except 0.4% of treasury stock, is in the hands of institutional shareholders. Brazil has been the priority market that has performed best during the first six months of the year in which it reached revenues of 4,645 million (10.6% more), with a gross result (Ebitda) of 1,900 million – 11% further-. .
All the group’s eyes are focused on the next strategic plan that will be presented next November at a new Investor Day and in which, with all certainty, Saudi Telecom Company (STC) will have something to say. The operator will predictably reach that date without having received the verdict of the Council of Ministers on the purchase of 9.9% of the group – today it already has 4.9% in securities, which makes it the first partner.