Telefonica of Spain has entered into an agreement to sell off 40% of its assets in four different countries in Central America to Corporacion Multi Inversiones (CMI). The sale is worth US$500 million and the proceeds would be used to pay off outstanding debt.

The Spanish telecommunications firm has sold off assets last year in order to reduce its net debt to a level below Eur47 billion or US$62 billion in 2013, a decrease of Eur4.3 billion from 2012 levels.

The price though can increase to US$72 million in accordance with future performance, valuing the assets at 6.5 times EBITDA according to Telefonica's regulatory filing.

According to the deal's provisions, Telefonica would spin off its assets from El Salvador, Guatamela, Nicaragua and Panama into a new group which CMI would continue to control.

Nearly a third of the 30 million inhabitants in Central America are below the age of 15. Its middle class is growing and is one of the key areas with high growth potential compared to the declining European markets.