Report: Telecom Italia mulls €9B sale of Brazilian unit

Telecom Italia is considering a sale of its 67 per cent in Brazilian mobile operator Tim Participacoes to raise €9 billion ($12.2 billion) as part of efforts to reduce its debt, Reuters reported, although the Italian incumbent has denied that it has started a sales process.

According to Reuters, which cited an unnamed source familiar with the matter, the sale of Tim Brazil is one of the options being looked at by new CEO Marco Patuano, who is expected to present his strategy to the board on Nov. 7. It is also expected that the company's new chairman will be selected on that date.

Former Telecom Italia Chairman and CEO Franco Bernabe resigned ahead of a board meeting on Oct. 3 over clashes with shareholders about strategy. Bernabe had favoured a capital raising to reduce debt and avoid a downgrade of its credit rating.

However, Telefónica is believed to prefer the route of asset sales, with some recent reports suggesting it could potentially seek to break up Telecom Italia's Brazilian business. Telefónica recently formed an agreement with core Italian shareholders to strengthen its hold of Telco, which owns 22.4 per cent of Telecom Italia, and is therefore set to have a greater say over the Italian operator's strategy in future.

Since then, Moody's has downgraded Telecom Italia's credit ratings by one notch to Ba1 from Ba3, realising the fears of Bernabe by classifying the Italian operator's bonds as "junk."

Telecom Italia's central task right now is to find a way of reducing its almost €29 billion of debt and restoring growth to its domestic mobile business. If the asset sale approach is adopted, some fear this could take too long. A sale of Tim Brazil in particular would be a complicated affair that could take up to a year to carry out, Reuters reported.

In its statement on Wednesday, Moody's said the remaining options to strengthen Telecom Italia's credit, whether related to capital or operating plans, regulation, financial strategy or asset sales, will take time to implement, even if they are successful.

For more:
- see this Reuters article
- see this separate Reuters article
- see this Bloomberg article

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