Cerberus touted as possible buyer of Telefónica Mexico stake

In a new twist to the long-running "Mexit" saga, US investment fund Cerberus Capital Management could be a candidate for acquiring 40% of Spanish telecommunications giant Telefónica's underperforming Mexican assets, according to media reports.

Several reports in Mexican and Spanish media point to Telefónica's CEO José María Álvarez-Pallete obtaining authorization from the company's board in October to sell part of the company in an effort to reduce its crippling 42.6bn-euro (US$48.6bn) financial debt.

The reports did not include a figure for the sale of Telefónica's Mexican unit, part of the telecom company's Hispam Norte division which also includes Central America, Colombia, Ecuador and Venezuela.

As of its last financial report to September, Hispam Norte's operating margin before depreciation and amortization (OIBDA) was the lowest of the group at 24.6% versus 33.6% for global operations. The company has complained about regulatory impacts and an intense battle in pricing with rivals América Móvil and AT&T. OIBDA margin for the Mexican operations in particular was even lower at 13.7%.

The reports suggest that the company could sell a percentage of the unit to Cerberus, a US$35bn investment fund which is no stranger to telecommunications as it recently completed the acquisition of New Jersey-based submarine cable company SubCom.

Telefónica and Cerberus did not immediately respond to BNamericas requests for comment on the stories. Telefónica has usually refused to discuss market rumors on the subject.

In its last conference call with analysts, Telefónica said it was evaluating its asset portfolio in terms of return on capex. Recently, Verizon was also touted as a potential suitor for Telefónica's Mexican unit.

The reports also mentioned the possibility of the company selling part of its Central American operations to Millicom's Tigo unit.

Hispam Norte is the smallest of Telefónica's regions by revenue, reporting 3bn euros for January-September, less than half the 7.6bn euros of its Brazilian operations and about 8.5% of the company's consolidated revenue.