Report: Telecom Italia preparing €7B bid for Vivendi's GVT

Telecom Italia is ready to outbid Spanish rival Telefónica in the race to acquire Brazilian broadband provider Global Village Telecom (GVT) from French media company, Vivendi.

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Telecom Italia CEO Marco Patuano

The Italian operator is preparing an offer worth up to €7 billion ($9.3 billion) in a deal that would hand Vivendi a 20 per cent stake in Telecom Italia, along with a share in the combined company Telecom Italia would create in Brazil if it succeeds in acquiring GVT, Bloomberg reported.

If accurate, the Telecom Italia offer would eclipse that made by Telefónica on Aug 5. The Spanish incumbent bid €6.7 billion for GVT and offered an 8.3 per cent stake in Telecom Italia to Vivendi in a deal that would allow it to merge Telefónica Brasil with GVT.

The report comes two days after Telecom Italia confirmed it is mulling an acquisition of GVT, but stated no offer has yet been made. The Italian operator also stated it has yet to approach the "corporate bodies of Telecom Italia and TIM Participações"--it's Brazilian business--regarding the potential acquisition.

Telecom Italia issued its statement in response to intense media speculation that a deal is being prepared. Reports stated CEO Marco Patuano met with Vivendi chairman Vincent Bollore last week to discuss a potential deal, which would allow Telecom Italia to strengthen its mobile and fixed line operations in the important Brazilian market.

The country is a key battleground for Telecom Italia and Telefónica, which compete under the TIM Brasil and Vivo brands respectively. Telefónica's offer to sell part of its stake in Telecom Italia would appease Brazilian regulator Cade, which has ordered Telefónica to either sell its shares in the Italian operator or dispose of Vivo. The regulator issued the order after Telefónica increased its holding in the Telecom Italia shareholder vehicle Telco last year.

For Telecom Italia, the benefit of a GVT tie-up lies in allowing it to sever ties with Telefónica and boost its Latin American operations. TIM Brasil grew earnings before interest, depreciation, and amortisation (EBITDA) by BRL193 million (€63.7 million/$85.3 million) year-on-year to BRL2.6 billion in the first half of 2014, despite a 1.8 per cent drop in revenues year-on-year.

For more:
- see this Bloomberg report
- read Telecom Italia's GVT statement
- view the operator's H1 2014 earnings statement [PDF]

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