Telecom Italia Braces for Failed Argentine Stake Sale

Big 5

Telecom Italia SpA (TIT) is considering creating a new unit to oversee its Latin American business as regulatory approval of a sale of its Argentine asset has become less likely, according to people with knowledge of the matter.

The discussions are over a back-up plan in the event Telecom Italia’s $960 million disposal of its 22.7 percent stake in Telecom Argentina SA to Mexican financier David Martinez’s Fintech Group can’t be completed, said the people, who asked not to be identified because the deliberations are private. The new division would allow Telecom Italia to wring synergies between the Argentine asset and its Brazilian subsidiary Tim Participacoes SA (TIMP3), they said. No final decision has been made.

Telecom Italia has twice extended a deadline for Fintech to complete the transaction, most recently to Sept. 25. The deal will be discussed at a Telecom Italia board meeting scheduled for that day, people familiar with the matter said last week.

A failed sale of Telecom Argentina would force Telecom Italia Chief Executive Officer Marco Patuano to “commit fully on developing faster networks instead of selling non-core ones,” said Andrea Giuricin, a professor at Milan’s Bicocca University who specializes in media and telecommunications.

Tim Weakened

Patuano, a year in the job, is focusing on high-growth markets such as Brazil and is boosting its domestic ultra-broadband network. Last month, Telecom Italia lost out to Telefonica SA of Spain in a bidding war for Brazilian broadband provider GVT, leaving Tim in a weaker position to compete in the largest phone market in Latin America.

Telecom Italia shares rose 0.4 percent to 92.2 euro cents at 9:04 a.m. in Milan. The stock is up 30 percent this year. Telecom Argentina shares were unchanged at 53.30 pesos yesterday in Buenos Aires. The company’s American depositary receipts rose 1.5 percent to $20.07 in New York, the highest closing price since Aug. 11.

Representatives for Telecom Italia declined to comment. A spokeswoman for Fintech in New York wasn available to comment. An official at Argentina’s communications secretariat didn’t respond to requests for a comment on the issue.

This week, billionaire Carlos Slim’s America Movil SAB (AMXL) said it plans to hold talks with Oi SA to make a joint bid for Tim. Telecom Italia has put a value of at least 13 billion euros ($16.8 billion) for its 67 percent stake in Tim, people familiar with the matter said this week.

Oi isn’t in formal talks with any third parties about Tim, it said yesterday in a stataement. Oi has hired Banco BTG Pactual SA to look at strategic options to buy Telecom Italia’s Tim stake.

Brazilian mobile operations accounted for about 30 percent of Telecom Italia’s sales of 23.4 billion euros last year, data compiled by Bloomberg showed.

Fintech agreed to pay $860 million for Telecom Italia’s 68 percent holding in the company that controls Telecom Argentina, as well as a direct minority stake, plus $100 million for agreements including some technical services for the carrier, according to terms announced in November.

Source: Bloomberg

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