Asia Business

Telefonica plans to sell a stake in its German unit

Shopper in Madrid
Image caption Telefonica has been hit by the recession in Spain.

Spain's biggest phone company, Telefonica, plans to sell shares in its German unit.

Analysts say the plan is part of the company's overall effort to reduce its debt burden.

Telefonica has been suffering from the recession in its home market where sales and profits have been falling.

That contributed to a downgrade of its credit rating by the agency Standard and Poor's earlier this month.

The agency Moody's has warned that it may also downgrade Telefonica's debt, but says the planned share sale could help the company shore-up its finances.

"If Telefonica lists part of its German business, they can keep a controlling stake and raise a significant amount of cash to pay down debt," said Moody's analyst, Carlos Winzer.

He estimates that the German business is worth up to 10bn euros ($12.4bn, £8bn)

"The market will now focus on how much cash Telefonica is going to raise from these initiatives and how much flexibility they are creating for themselves in order to prevent further downgrades," he said.

Telefonica said it may also list businesses in Latin America.