Oct.30 - Shares in Telefonica's O2-branded German unit rise over 3 percent following Europe's biggest initial public offering in more than a year. Ciara Sutton reports.
It's the largest new listing in Europe for more than a year, and Telefonica Deutschland's CEO was on hand to kick it off. Europe's second largest phone operator is testing the appetite of investors with the flotation of its German unit O2. Shares in the company started trading more than 3 percent above their initial offering price. CEO Rene Schuster. (SOUNDBITE) (English) TELEFONICA DEUTSCHLAND CEO, RENE SCHUSTER, SAYING: "The request for the stock is overwhelming and clearly we are absolutely delighted to be in such a position. We are now very focussed on operations execution, we have everything that we need and we are excited to be right in the middle of mobile data and smart phones in Germany." Telefonica raised nearly one and half billion euros from listing the 23 percent stake in O2. But Baader Bank's Robert Halver is cautious about the venture. (SOUNDBITE) (German) ROBERT HALVER FROM BAADER BANK, SAYING: "Market entries are like the salt in the market soup which until now have been very bland. If Telefonica Deutschland enters the market here with so much euphoria then this is already a positive sign. However, one must also say that the money is to be used to pay back the debts of the parent company in Spain. So it's not all positive." Telefonica has brands all over the world but is struggling in Spain - its recession-hit home market. It needs to raise 7-8 billion euros a year for the next 3 years to cover its debt repayments and save its investment grade rating. Flotations have been few and far between this year, largely thanks to the euro zone turmoil. But many expect demand to be strong and that could encourage other phone companies to follow suit.