Telefonica has stated that it will divest its holding in Telecom Italia – and therefore its interest in TIM Brasil – following its acquisition of Brazilian fixed provider GVT from French media group Vivendi.
The French group has entered exclusive negotiations with Telefonica after the Spanish operator group made a €7.45 billion bid for GVT. A rival €7 billion offer from Telecom Italia was rejected.
The Spanish group has included its 8.3% holding in TI as part of its offer for GVT. Vivendi would become TI’s largest single stakeholder if it chooses to assume control of the shares.
Telefonica’s efforts to divest its holding in TI are motivated primarily by the need to comply with orders from Brazilian antitrust regulator Cade. The watchdog has informed the Spanish firm that it must either find a partner for its local unit Vivo or cut ties with TIM Participacoes – which it holds via its stake in TI.
Telefonica chairman Cesar Alierta stated that following the group’s successful bid for GVT, “the message is clear; we don’t want to stay in Telecom Italia”.
Alierta’s comment follows Telefonica’s July announcement that it would sell €750 million in bonds that convert to TI shares, thereby reducing its voting share in the Italian operator by 6.5%.
The Spanish firm is planning to issue €3.4 billion in new shares in order to finance its acquisition of GVT, although Alierta has noted that if market conditions prevent a capital increase, the firm could use treasury stock. Other reports have indicated that Telefonica may sell shares in its Brazilian unit Vivo as a means of financing the deal as this would open up the possibility of further acquisitions.
TI’s unsuccessful bid for GVT leaves the operator in a weaker position, and its TIM Participacoes unit could become a target for acquisitions. Brazilian integrated operator Oi is already preparing a bit for the business, while Vodafone has also been mooted as a potential buyer.