Report: Telefónica in talks to sell Telecom Italia stake

Telefónica is in talks on the sale of its stake in Telecom Italia in an effort to relieve regulatory pressure in Brazil, local newspaper Folha de S.Paulo reported on Friday.

Without citing its sources, the Brazilian paper said Telefónica is currently negotiating a deal with investment funds. Neither Telefónica nor Telecom Italia was quoted in the report.

Telefónica, which owns Brazilian mobile market leader Vivo, competes with Telecom Italia's unit TIM Brasil and came under pressure from Brazilian regulator Cade when it boosted its investment in Telecom Italia shareholder vehicle Telco last year. Cade has ordered Telefónica to either sell its shares in Telecom Italia or dispose of Vivo.

Minority shareholders in Telecom Italia have also previously expressed fears that the Spanish company would force a sale and break up of TIM Brasil, although the Spanish company and Telecom Italia's management have denied plans to do so.

Telco's directors recently approved requests from Italian investors Generali, Mediobanca and Intesa Sanpaolo to dissolve the Telco shareholder pact that has existed since 2007. Once the pact is dissolved, Telefónica would become the largest single shareholder in Telecom Italia with a 14.77 per cent stake--a situation that is unlikely to improve relations with the Brazilian authorities.

As things stand, Telco owns 22.4 per cent of Telecom Italia. Telefónica in turn owns around 66 per cent of Telco, and 46.18 per cent of the voting rights. Intesa Sanpaolo and Mediobanca each currently hold a 7.3 per cent shareholding and 11.62 per cent of the voting rights, while Generali owns around 19.3 per cent of Telco and 30.58 per cent of the voting rights.

The completion of the Telco demerger is subject to approval by Brazilian, Argentine and Italian regulatory authorities as well as by Telecom Italia shareholders.

For more:
- see this article in Folha de S.Paulo (in Portuguese)

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