Telefinica buys British firm Cancom 400 million euros, specializing in end-to-end cloud cybersecurity solutions - Telefónica has increased its profits tenfold, according to the financial results that the Spanish teleco has presented on Thursday relating to the first half of the year. In 2021, the firm led by José María Álvarez-Pallete closed or announced divestments and sales, such as those of the Telxius towers or its submarine cable.

But although its initial purpose is to reduce debt (today almost 30% lower than the one registered a year ago), the Spanish firm is repositioning itself. As it advanced two years ago, Telefónica wants to be more technological. For this reason, a corporate operation has been announced this Thursday whereby the Spanish multinational has just acquired 100% of the shares of a British cloud firm.

The acquired company is Cancom and is a company specialized in end-to-end cybersecurity solutions in the cloud. The operation, pending closure, would be settled in the disbursement of about 340 million pounds sterling by the teleco, which at the change translates into 398 million euros.

Telefinica buys British firm Cancom 400 million euros

The operation has been led by Telefónica Cybersecurity & Cloud Tech, one of the subsidiaries of teleco's new technology division, Telefónica Tech, which expects to find investors in the coming months.

Specifically, Telefónica expects to put 49% of Telefónica Tech in the market and as some newspapers have advanced, there are already interested. KPMG and Morgan Stanley would be piloting this process.

Telefinica buys British firm Cancom 400 million euros

The operation has been announced through a Relevant Fact that has been referred to the National Securities Market Commission (CNMV) and which is already echoed by several economic means, such as Cinco Días. In the document La Española abounds that Cancom will reach 190 million euros in turnover in 2021 with an adjusted ebitda margin of 15.4%.

The operation consolidates Telefónica's technology and cloud business in the United Kingdom, where the merger between O2 and Virgin Media, the US subsidiary of Liberty Global, closed.

This operation in the Uk is also part of the strategy presented at the end of 2019 by the Spanish operator that seeks to focus on its main markets, including the United Kingdom, and bet on its new subsidiaries such as the technology Phone Tech or infrastructure Telefónica Infra.

Telefinica buys British firm Cancom 400 million euros

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Telefónica multiplies its profit tenfold in the first half to 8,629 million euros due to the closing of the merger of O2 and the sale of the Telxius towers, despite the fall in revenue

Telefónica's profit in the first half of 2021 reached 8,629 million euros, according to the results presented by the operator to the CNMV before the opening of the market. Compared to a profit of 881 million euros in the same period of 2020 in the midst of the COVID-19 crisis, the profit of the accounts presented today means multiplying this figure by ten.

The closing of the merger between O2 and Virgin Media in the United Kingdom and the sale of the Telxius towers allow the operator to close the semester with these historical figures.

The operation in the United Kingdom involves the creation of a joint operator between the two operators with which they seek to be a leader in the market. The merger was announced in the midst of severe confinement by the pandemic and was finally approved by the British regulator in May of this year.

To this movement in January of this year was added the largest divestment in assets of the Pallete era selling the towers of Europe and America of its subsidiary Telxius to the leader of the American Tower sector. The operation involved the sale of almost 31,000 sites —the undersea cable network, which includes two of the largest projects in the world, Marea and Brusa, has not been awarded— for a total amount of 7,700 euros.

These two historic operations are what allow the operator to record record profits. However, revenues fell 6.5% in the first half to 20,305 million euros. If only the second quarter is taken into account, the group's revenues stood at 9,964 million euros, 3.6% less than in the same period of 2020. Although the group points out that in organic terms, the income of the first half grew by 0.5%.

If we look at the revenues of the second quarter, this figure reached 9,964 million euros, 3.6% less than in the same period of 2020, but 3.4% more in organic terms.

By markets, Spain accounts for 29% of revenue in the first half of the year followed by Hispam which represents 19%, Germany has a weight of 18% and Brazil, 16%. The United Kingdom, after the closing of the merger with Virgin in which Telefónica has 50% of the resulting company, represents 15% of the group's revenue.

The end of the two major operations announced by the company in its latest action plan coincide in time and trigger the results of the operator, which continues on its path to reduce debt. Telefónica ends June in 26,200 million euros of debt, which is 29.5% below the figure of June 2020.

"In the last five years, the company's debt has been cut in half, from more than 52,000 million euros registered in June 2016," the operator said in a statement.

"These results show that Telefónica is on the right track, executing its strategic plan as a critical accelerator in the company's transformation process. Telefónica consolidates its leadership as a company that takes advantage of all the opportunities offered by the digital revolution, as a responsible, sustainable company and always committed to operational excellence,” said Telefónica's president, José María Álvarez-Pallete, in the statement.

The operator points out that the results presented on Thursday, July 29, are in line with the operational plan that was set at the end of 2019 when they decided to focus on four markets and create their divisions of Telefónica Tech and Infra to value these businesses of the group.

"In Hispam there have been important advances to achieve lower capital exposure in the region, as evidenced by the vehicles created with KKR in Chile and Colombia to deploy fiber; the generation of greater efficiencies; and the reduction of risks through a greater proportion of debt in local currency," Telefónica said in a statement.

This indicates that debt denominated in Latin American currencies has already reached 30% of the group's financial commitments, including leases, compared to 16% in June 2020 and 21% in March 2021. This evolution allows to generate a natural coverage that reinforces the sustainability of the financing structure of the company. In addition, revenues have experienced a notable improvement in the region in the second quarter, with organic growth in all markets.

Telefónica Tech in the second quarter, the revenues of this unit have grown to 203 million euros, 26.6% more than in the same period of 2020, for a total of 369 million in the whole semester, 25.9% more.

For its part, Telefónica Infra continued its strategy in the field of infrastructures with the closure of the creation of FiBrasil, a company owned 50% by CDPQ and Grupo Telefónica (25% Infra and 25% Telefónica Brasil) to deploy fibra in Brazil that has already started operations.

"This vehicle, together with the creation last year of UGG in Germany, gives Infra an increasingly relevant role in providing more inclusive connectivity," explains the company. In addition, Telxius, 50.01% owned by Infra, has strengthened its international network with Tannat, a new generation submarine cable that connects Brazil with Argentina with its 2,000 kilometers in length.