* Telefonica to list German unit, weigh listings in LatAm
* Moves aimed to reduce debt, prevent credit downgrades
* Telefonica struggling in home market of Spain
* Likely scuppers Telefonica as white knight for KPN
By Sarah White and Leila Abboud
MADRID/PARIS, May 30 (Reuters) - Spain's Telefonica , under increasing pressure to slash its debt pile, said on Wednesday it was preparing to list its German unit and possibly other businesses in Latin America, stepping up its plan for disposals.
Telefonica needs to raise 7-8 billion euros a year through 2015 to cope with debt maturities and is also struggling with sinking revenue and profits in its home market of Spain, where one in four is unemployed and the banking industry is in crisis, pushing the state's cost of borrowing higher.
Ratings agencies have cracked down on the telecoms giant recently, with Standard & Poor's downgrading its debt to 'BBB' on May 24, citing intense pressure in Spain as well as deteriorating prospects in Telefonica's other European markets, such as the UK.
A day later Moody's placed Telefonica on review for downgrade over worries that the company was not moving ahead fast enough on asset sales to reduce its debt levels.
Moody's analyst Carlos Winzer said Telefonica's moves showed that it was dedicated to delivering on its leverage target of 2.35 times debt to operating income before depreciation and amortisation (OIBDA) by year-end, and avoiding further downgrades.
"If Telefonica lists part of its German business, they can keep a controlling stake and raise a significant amount of cash to pay down debt," said Winzer in an interview, adding that the German business as a whole would be worth 8-10 billion euros.
"The market will now focus on how much cash Telefonica is going to raise from these initiatives and how much flexibility they are creating for themselves in order to prevent further downgrades."
Telefonica did not say how much of its 02 Germany business it would seek to list.
The group had already announced efforts to sell 1.5 billion euros in non-core assets, and the potential listings would bring in a much-needed cash infusion, which would then be used to pay down debt.
Telefonica said in a statement that its board was in favour of "proactive" management of its assets, and that as well as the German listing, it was analysing similar moves in Latin America.
It added it would be paying out 1.50 euros per share to shareholders for 2012, but would alter the structure so roughly 0.40 euros of the dividend would be in cash and the rest in a scrip dividend and share buybacks, which would take pressure off its cash flows.
It plans to pay out a similar amount for 2013, though the structure of that it not yet known.
"All of these measures reflect Telefonica's pledge to increase its financial flexibility and reach a debt ratio (measures by net debt to OIBDA) of 2.35 time in 2012, while maintaining attractive remuneration for shareholders," the group said.
Telefonica's woes in its recession-hit home market also now look likely to have put paid to any plans it might have harboured in a healthier corner of Europe, namely Germany, where Dutch telecom firm KPN's E-Plus could come up for grabs.
KPN is weighing asset sales in Belgium and Germany as it tries to ward off an unsolicited tender for 27.7 percent of its shares from Mexican tycoon Carlos Slim's America Movil .
Telefonica's 02 is the smallest operator in Germany and would be a natural buyer for E-Plus, which is the third-largest mobile operator after Vodafone and Deutsche Telekom.
Winzer, the Moody's analyst, said Telefonica's decision to list 02 Germany shows the group is not interested in bidding for KPN's E-Plus.