Telecom Italia (TI) has decided to continue its in-depth investigation of its strategic options in Brazil, where consolidation seems increasingly likely.
The indebted Italian incumbent announced today that its board of directors came to the decision…
Telecom Italia (TI) has decided to continue its in-depth investigation of its strategic options in Brazil, where consolidation seems increasingly likely.
The indebted Italian incumbent announced today that its board of directors came to the decision after examining public information on current M&A activity in “core market” Brazil.
Commenting on the company’s H1 results, CEO Marco Patuano said the company will assess all options for its mobile operator TIM Brasil but will not make “crazy offers”. He also commented that TI has not ruled out a merger between its own Brazilian unit and fixed-line telco GVT.
His comments come as Spain’s Telefonica, TI’s largest shareholder following the break-up of its controlling investor group Telco, yesterday offered R$20.1bn (US$9bn) to acquire GVT. Its plan would see GVT absorbed into its Telefonica Brasil (Vivo) unit.
GVT’s current owner, French media group Vivendi, would have the right to acquire an 8.31% stake in TI from Telefonica for a fixed price once the deal has closed, leaving the Spanish incumbent with a very small stake.
Telefonica’s acquisition of a majority stake in Telco last autumn has created regulatory issues in Brazil, where Vivo and TIM Brasil are the two largest mobile operators. In December competition watchdog Cade told Telefonica to either reduce its indirect stake in TI or find a new partner to take joint control of Vivo.
Today, Reuters cited Cade president Vinicius Marques de Carvalho as saying an offer by Telefonica to transfer its stake in TI to Vivendi would help to resolve its regulatory concerns.
TI reported revenues of €10.55bn for the first half of 2014, down 6.5% on last year’s H1 result. EBITDA was down 5.3% to €4.35bn and adjusted net debt stood at €27.36bn, down about €1.5bn from the end of June 2013. Its core earnings fell 7.6% in H1 this year, which the company attributed to the weak Italian economy and a slowdown in Brazil.
Separately, Patuano noted that the sale of towers in Brazil is close to completion.
