Telefonica Peru instigated a voluntary bankruptcy proceeding in an attempt to restructure its debt, blaming its financial plight on tax issues and administrative decisions it claims put it at a competitive disadvantage.

In a statement, the Telefonica unit disclosed it had lodged a request with Peruvian authorities to enter an ordinary bankruptcy procedure (PCO).

It explained the move was deemed to be the best way to protect the provision of communications services to its 13 million-strong customer base and “does not imply a liquidation, much less a bankruptcy”.

Telefonica said in recent years its financial situation had been affected by “more than 20 years-old tax contingencies and administrative decisions that have placed the company at a competitive disadvantage in a particularly challenging market environment”.

In its most recent financial results statement, for Q3 2024, Telefonica booked a €314 million non-cash impairment on the asset describing the level of competition as “aggressive”.

Telefonica Peru executive president Elena Maestre explained the decision to file for a PCO came “after evaluating different alternatives to ensure the financial stability of the company”.

To get the PCO, the operator’s parent company Telefonica Hispanoamerica has opened a line of credit to provide the operational cash needed to maintain service.

Bloomberg reported the move followed failed attempts to sell the unit and at the start of a legal challenge to tax payments levied in the country.   

Its latest issues in its Peruvian operation come at a time of continued speculation about the shape of Telefonica’s business in Latin America moving forward, with units in Mexico and Argentina reportedly up for sale alongside Telefonica Colombia.