Telecom Italia Gains on Brazil Unit Breakup Report: Milan Mover

Jan 03, 2014 4:19 am ET

Jan. 3 (Bloomberg) -- Telecom Italia SpA shares rose to an eight-week high after a report that its largest owner is advancing a plan to sell the company’s Brazilian business to competitors.

The stock climbed as much as 5.7 percent and gained 5.2 percent to 74.6 cents at 10:17 a.m. in Milan. Volume was about 49 percent of the three-month average.

Telecom Italia investor Telefonica SA is close to setting up a financial vehicle to split the Brazil unit, Tim Participacoes SA, and sell it to rivals Vivo Participacoes SA, Oi SA and Carlos Slim’s Claro, Il Sole 24 Ore reported today without saying where it got the information. Madrid-based Telefonica controls Vivo and a sale of Tim would help address regulator concerns that the Spanish company has too much influence over the Brazilian market.

Telefonica favors a sale or breakup of Tim, people with knowledge of the matter said last year, when the Spanish company agreed to increase its stake in the holding company that owns 22.4 percent of Telecom Italia. Tim, based in Rio de Janeiro, has a market value of $12.3 billion, and parent Telecom Italia is struggling to reduce its debt and financing costs after its rating was cut to junk last year by Moody’s Investors Service and Standard & Poor’s.

Last month, Brazil’s antitrust regulator ordered Telefonica to lessen its influence in Brazil’s phone business either by reducing its holdings or by persuading Telecom Italia to sell its local unit.

Spokesmen for Telefonica and Telecom Italia declined to comment on any breakup plans in Brazil.

--Editors: Ville Heiskanen, Kenneth Wong