Tag Archives: Telecom Italia

Telecom Italia may exit Brazil and towers, as deep review continues

Telecom Italia continues to go through the painful process of adjusting to the modern world, facing recessionary pressures at home and in its former growth engine in Brazil.

Italy has been suffering from the Eurozone recession since the 2008 crash, and this has helped make Telecom Italia (TI) the center of persistent takeover rumors. It is engaged in a major strategic review, which could lead it to be the first major European incumbent to break up. In the shorter term, however, it is looking for smaller deals to improve its cash and debt position, including the sale of its towers and a possible exit from Brazil.

The firm says it is seeing “strong interest” in its tower company, Inwit, which operates about 11,500 sites plus backhaul links. In June, TI raised about €875m in an IPO of 40% of Inwit, giving the whole business a market value of €2.4bn. TI CEO Marco Patuano said this week that the telco had “built a company that is financially very light to keep our hands free and able to move in all directions”, but added that there were no firm offers yet on the table.

TI will discuss the options for Inwit – which include mergers with other tower operators in the region to create pan-European scale – at its board meeting this week. However, one of the largest European towercos, Cellnex (which was itself floated by Spanish telco Abertis), denied speculation that it would make a bid, even though it already has Italian assets, and has said it aims to be the “American Tower of Europe”.

Patuano has said TI will be a “key player” in consolidating passive infrastructure in Italy, as part of the broader global trend for operators to divest their towers and other sites, to improve their cost efficiencies. That, in turn, is leading to the formation of powerful towercos with consolidated national or international portfolios, which either be joint ventures between the carriers (as in China), or fully independent (like Cellnex, American Tower or the UK’s Arqiva).

Wind already sold its towers last year, to Cellnex, netting €693m for a 90% stake in the unit, which controls 7,377 sites.

Last year, TI divested 6,481 towers owned by its Brazilian subsidiary TIM Participacoes, in a $900m deal with American Tower. Now it may consider more radical moves in Brazil, whose status as a mobile goldmine has been destroyed by the huge country’s deepest recession for 25 years.

Against that backdrop Patuano says TI will review its strategic plan for TIM Participacoes, Brazil’s second largest operator, in which the Italian telco holds a two-thirds stake. Brazil generates about 30% of TI’s revenues but Patuano told Bloomberg, ahead of the board meeting, that his firm was “focused at the moment on organic investments, but we need to review the strategic plan since the situation in Brazil worsened a lot”.

In February, TI unveiled plans to increase its investment in Brazil and plough BRL14bn ($3.6bn) into LTE expansion as well as 3G coverage improvement. It said it would create a footprint of 15,000 4G and 14,000 3G sites by 2017. Some of that spending may now be reduced, though TI stressed that it would make most of its investments in US dollars to protect itself from the impact of the crash in value of the Brazilian real.

The investment plans were seen as a strong sign that TI aimed to stay in Brazil, even though it was widely expected to exit after it lost out to Telefonica in the race to acquire GVT – and with that failure, lost the chance to gain fixed-line and TV assets and mount a future quad play.
TI insisted that TIM Brasil remained strategic, and went on to explore an acquisition of the fourth MNO, Oi, to improve its mobile scale and add some fixed lines. However, it may be reviewing the future of its Brazilian activities again.

All this is part of an overall and ongoing review, which will affect the home market too, although the economic situation is now improving in Italy, expanding TI’s options. In June, French media giant Vivendi became its largest shareholder, replacing Telefonica. Vivendi sold its telecoms interests last year, including its stake in SFR in France, but its chairman Vincent Bollore could now be a kingmaker in the consolidation of the Italian market, where Wind and 3 Italia are also looking to merge. That would create a stronger third rival to TI’s TIM mobile operator and to Vodafone, but may be blocked by regulators because it reduces the number of MNOs.

TIM Brazil Launches Pay TV Offer

TIM Brazil yesterday launched a device that will integrate free digital TV content, Netflix, YouTube and TV pay by TV Alphaville. The new device, called Live TIM Blue Box, is a company’s bet in offering pay TV content and get closer to the offering of the other major carriers – Oi, Telefonica and Claro (the Mexican group America Movil, which also owns the Net) – The trio has been offering pay TV in the Brazilian market for four years. TIM will not buy content, such as its competitors, but will work with partnerships.

Read more about the Brazilian Telecom Market

CADE rejects Telefónica and Telecom Italia merge. Vodafone is arriving in Brazil?

Brazilian antitrust authority,  Administrative Council for Economic Defense (Cade) rejected Telefónica’s (TEF) embargoes and kept the fine of BRL 15 million that was imposed on the company for breach of the agreement signed in 2010, by which it should stay away from TIM (TSU), controlled by Telecom Italia (TI).

Official Announcement

With the negative for the embargoes, Telefónica must appeal of the decision. Therefore, it is necessary to wait for the posting in the “Diário Official”, the official newspaper.

The fine was imposed against Telefónica on December 4th, 2013, when the antitrust authority imposed conditions when judging the acquisition by the Company of shares of Telco, holding that controls Telecom Italia.

According to Cade, Telefónica will have to choose between seeking a new partner in Vivo (VIV), who would be entitled to have 50% of the control in this company, or selling the stakes it acquired in TIM through the purchase of shares of Telco.

Rumors have that Vodafone (VOD), who recently started operating in Brazil via enterprise services, is looking to expand into the consumer market and is interested in acquiring a stake in TIM, since it’s very unlikely that Telefónica would let got of the control on Vivo.

Check out our analysis on Brazilian companies