The Brazilian unit of Spanish telecommunications giant Telefonica has approved a share buyback plan aimed at increasing shareholder value.

In a press release, Telecomunicacoes de Sao Paulo S.A. said the company's board of directors had approved the program, which will involve a maximum of 2,700,000 preferred shares, or less than 10 percent of the outstanding shares on Aug. 11.

The Telesp stock is to be held in treasury and subsequently disposed of and/or cancelled, "without reduction in the capital stock, for the purpose of increasing shareholder value," the company said.

The company's announcement coincided with a downgrading of Telefonica's long-term credit rating by Standard & Poor's from A- to BBB+.

S&P kept the Spanish company's short-term credit rating at A-2 and said the outlook for both ratings was "stable."

The ratings agency said the downgrade was due to challenges the company faces in the Spanish market, a possible increase in regulatory risks in some Latin American markets and the company's "aggressive dividend distribution policy."

Telefonica is one of the world's largest telecommunications companies, while Telesp provides fixed-line telecom services to residential and commercial customers in the southeastern Brazilian state of Sao Paulo.