Telecom Italia confirms interest in Vivendi unit GVT

Telecom Italia confirmed speculation that it is interested in making an offer for Vivendi-owned Global Village Telecom (GVT), although the Italian operator stressed that no bid has yet been made for the Brazilian broadband services provider.

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Telecom Italia CEO Marco Patuano

In a short statement issued on Thursday evening, Telecom Italia said it was responding to "numerous press reports" of its interest in buying GVT, and confirmed "it is undertaking a detailed review to determine whether it may be opportune to submit an offer to Vivendi SA (GVT's parent company) to create an industrial combination that would include integration of the Brazilian businesses of the two groups."

Telecom Italia CEO Marco Patuano reportedly met Vivendi chairman Vincent Bollore again this week to discuss such a tie-up.

The Italian operator provides mobile services in Brazil under TIM Participacoes. It has long been speculated that the company is interested in combining TIM Brasil with another Brazilian player to create a stronger mobile and fixed business on the important Brazilian market.

Any move to buy GVT would put Telecom Italia on a collision course with its Spanish shareholder: last week, Telefónica launched an offer to buy the Brazil-based unit for a total value of €6.7 billion ($8.96 billion). As part of its offer for GVT, Telefónica also said Vivendi could buy up to 8.3 per cent of Telecom Italia's voting share capital.

Meanwhile reports say that the Italian company's plan, which could be finalised in three weeks, could involve a counter bid for GVT and also enable Vivendi to buy a stake in Telecom Italia via an equity swap.

"Until we see what terms Patuano is willing to offer it's hard to really know if they've got a shot of competing with Telefónica," Walt Piecyk, an analyst at BTIG LLC, told Bloomberg.

Brazil is a key battleground for Telefónica and Telecom Italia, where they operate competing telecoms businesses under the Vivo and TIM Brasil brands respectively. Telefónica has also been under pressure from Brazilian regulator Cade since 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.

The Spanish company's move to sell the Telecom Italia stake as part of a possible merger with GVT would certainly kill two birds with one stone: allay competition concerns in Brazil; and boost its Latin American operations by merging with a fast-growing player on the local broadband market.

For Telecom Italia, a deal with Vivendi would allow it to sever its ties with Telefónica, boost its Latin American operations and possibly secure Italian media group Mediaset in order to expand its media activities in Italy.

For more:
- see this Bloomberg article

Related Articles:
Report: Telecom Italia CEO to discuss GVT bid with Vivendi this week
Report: Telecom Italia seeks to trump Telefónica over GVT
Telefónica offers Vivendi the option to buy its Telecom Italia stake
Telecom Italia CEO rules in Brazil merger, stresses independence from Telefónica
Telefónica cuts stake in Telecom Italia through bond sale

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