Telecom Italia (NYSE:TI, StockForum), Italy's largest telecom with operations in Europe, the Mediterranean Basin and South America, was rumored, at least in part, to be moving toward scrutinizing any future offer for their Brazilian unit, Tim Participacoes SA (NYSE:TSU, StockForum), much to the chagrin of investor, Telefonica SA (NYSE:TEF, StockForum).
According to the Bloomberg News release posted today, “The directors, backed by Chief Executive Officer Marco Patuano, are proposing a motion so that any potential offer for the Brazil unit would be scrutinized by a special committee, said the people, who asked not to be named because the plan isn’t public. Telecom Italia’s board is set to vote on the motion in a Jan. 16 meeting, the people said.”
Telefonica is in deep with Brazilian antitrust regulators who demanded that the company divest itself of some of the country's phone business. Telefonica can accomplish this by either selling off holdings or convincing Telecom Italia to sell off Tim.
Telecom Italia is struggling with debt and declining business while Tim continues to grow, so board members have proposed a motion that any bid on Tim be classified as “related parties of greater importance”. This would allow the company run any deal past an independent committee to confirm that Telecom Italia's best interests are being served. Of the company's eleven directors, five are independent of Telefonica.
News popped today that Telefonica was moving forward with a sales deal for Tim, involving a financial vehicle that would allow Tim's split to be sold to Telefonica Brasil, Oi SA and Carlos Slim's Claro. No sources were cited however in the newspaper report.
Apparently the company has been called to the carpet by Italian regulator Consob to make a statement regarding the possible sale by January 6.
As of today, neither Telefonica or Telecom Italia will comment to confirm or deny break up strategies in Brazil and Telecom Italia has claimed no knowledge of any impending sale as it classified the unit as “strategic” in a recent statement.
JP Morgan Chase & Co analyst, Hannes Wittig mentioned in an email to the Bloomberg reporter, that although Telecom Italia's move won't prevent the sale, it will however, enhance the risk of no deal being reached due to disadvantageous valuation affecting Telecom Italia minority shareholders.
Telecom Italia was in the news recently when the company selected iconectiv's mobile ID solution.
Shares were up 7.64% on the news to $10.28 per share.
Currently there are 1.9b outstanding shares with a market cap of $19.8 billion.