S&P revises Telefonica to stable

S&P said it revised its outlook on Telefonica SA and related subsidiaries Telefonica Moviles Chile SA and Telefonica Chile SA to stable from positive.

At the same time, the agency affirmed its BBB/A-2 long- and short-term corporate credit ratings on Telefonica and our BBB long-term corporate credit ratings on Telefonica Moviles Chile and Telefonica Chile. It also affirmed all related issue ratings on the three companies.

S&P said the outlook revision reflects its assumption of lower proceeds from asset sales in the near-term following the European Commission's decision to block the proposed sale of O2 U.K. to Hutchison's Three U.K.

Nevertheless, the agency understands that Telefonica remains dedicated to reducing leverage in the short-term and expect it to pursue various options to reduce leverage, including the potential IPO of Telxius, potential divestment of noncore assets and minority stakes, further attempts to sell its stake in O2 U.K., additional hybrid issuance and adjusting shareholder remuneration through offering scrip dividends (where shareholders get new shares, instead of cash).

S&P said it anticipates that these measures will support positive discretionary cash flow generation over the medium-term.

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