Telecom Italia eyes sale of Brazil unit
Telecom Italia is prepared to sell its prized Brazilian business but would first need an alternative investment plan, according to the new chief executive of the heavily indebted Italian telecoms group. Marco Patuano told investors at a Barcelona conference that the company would not sell the business simply because it would reduce its substantial debts. TI, whose net debts are close to €30bn, recently sold its Argentine operations after receiving an unsolicited $860m bid, leading to speculation that its stake in TIM Brasil could be next.
Mr Patuano said that he would have to evaluate not just the “size of the cheque” for TIM Brasil, but whether he could present shareholders with an alternative source of growth. Telecom Italia has laid out a three year strategy to turn around the domestic business. Analysts from Macquarie on Wednesday said a Brazilian “sale will still happen in late 2014”, which would buy the group time to improve conditions in its home market. “Just repaying debt seems to me a strategy that is a little short-sighted,” said Mr Patuano at the Morgan Stanley conference. Asked whether he had a sufficient plan, he said, “The answer is, sorry, gentlemen and ladies, I’ve had five weeks [in the job].” The sale of the Brazilian business is seen by analysts as supported by Telefónica, which took control of a key shareholder group in Telecom Italia earlier this year. However, Mr Patuano suggested that the most likely buyer of TIM would not be one of the current players in Brazil, such as Carlos Slim’s America Movil. “It would be the only and last chance [for another telecoms operator] to enter Brazil,” he said. He said that, unlike Italy, the Brazilian market was large enough for at least four operators to operate profitably. Analysts say that Telefónica would, however, prefer to reduce the number of companies in Brazil to bolster its own business.
Mr Patuano said that slower growth in Brazil’s voice market means that operators are now focused on investing in data connectivity to allow consumers faster access to internet content. “I personally asked my guys to change the plan versus the previous one [so that capital expenditure in Brazil increases],” said Mr Patuano. The Telecom Italia stake in the Brazilian business is valued at about €6bn. Telecom Italia wants to reduce an adjusted net debt of €28.2bn to less than €27bn by the end of 2013. Telecom Italia is also progressing with plans to sell its mobile phone masts and media business.