Background on Telefónica del Perú and its Relevance
Telefónica del Perú (TdP) is a significant telecommunications company in Peru, previously holding 99.3% ownership by the Spanish telecom giant Telefónica S.A. TdP has been a major player in the Peruvian telecom market, offering services such as fixed-line telephony, mobile telephony, and broadband internet. However, the company faced severe financial difficulties due to tax disputes and administrative decisions that put it at a competitive disadvantage.
Recent Developments and Fitch’s Rating Action
In February, Telefónica del Perú declared bankruptcy after its parent company, Telefónica S.A., recorded a non-monetary devaluation of 314 million euros in the value of its Peruvian unit.
Fitch Ratings announced on Tuesday that it had lowered Telefónica del Perú’s local and foreign currency debt ratings to “Restricted Default” (RD) from “C,” while maintaining the senior unsecured bond rating at “C.” The agency cited TdP’s failure to pay principal and interest on its international bond (2027) due by April 10, 2025, and local bonds maturing on April 19 as the primary reasons for the downgrade.
Moreover, TdP is currently undergoing an ordinary restructuring process (PCO) to renegotiate its financial obligations, which Fitch considers an event of default.
Telefónica’s Decision to Sell its Peruvian Unit
In response to the financial turmoil, Telefónica S.A. announced this month that it had agreed to sell its Peruvian subsidiary, which recently sought bankruptcy protection, to Argentine Integra Tec International for approximately 900,000 euros (1.02 million USD).
Impact on Customers and the Telecom Market in Peru
The ongoing issues at Telefónica del Perú may raise concerns about the stability of telecommunications services in Peru. As the largest telecom company in the country, its struggles could potentially affect service quality and reliability for its customers. However, it is still unclear how the sale to Integra Tec International will impact existing customers and employees.
The restructuring process and potential changes in ownership may also create uncertainty for other telecom players in the Peruvian market, as they navigate the evolving landscape.
Key Questions and Answers
- What led to Telefónica del Perú’s financial difficulties? Tax disputes and administrative decisions placed the company at a competitive disadvantage, contributing to its financial struggles.
- What actions did Fitch Ratings take regarding Telefónica del Perú’s debt? Fitch lowered TdP’s local and foreign currency debt ratings to “Restricted Default” (RD) from “C,” while maintaining the senior unsecured bond rating at “C.”
- Why did Fitch downgrade Telefónica del Perú’s debt? The primary reasons for the downgrade were TdP’s failure to pay principal and interest on its international bond (2027) due by April 10, 2025, and local bonds maturing on April 19.
- What is Telefónica del Perú’s current status? The company declared bankruptcy in February after its parent company, Telefónica S.A., recorded a non-monetary devaluation of 314 million euros in the value of its Peruvian unit.
- What is Telefónica S.A.’s plan for its Peruvian subsidiary? Telefónica S.A. agreed to sell its Peruvian subsidiary, Telefónica del Perú, to Integra Tec International for approximately 900,000 euros (1.02 million USD).
