Tim Tumbles as Telecom Italia Damps Sale Speculation

Tim Participacoes SA sank the most in six weeks after Telecom Italia SpA, the mobile-phone service provider’s parent company, signaled that it might not sell the Brazilian unit as part of a plan to reduce debt.

The shares fell 3.9 percent to 10.63 reais at the close of trading in Sao Paulo, the most since Sept. 25. It was the worst performance on the Ibovespa stock benchmark, which lost 0.9 percent.

Tim had rallied 35 percent this year amid speculation that Telecom Italia might be considering a sale, which investors speculated would enhance the value of the company. The Milan-based company yesterday unveiled plans to sell its Argentine business, assets including wireless towers in Italy and Brazil and a mandatory convertible bond to raise a total of about 4 billion euros ($5.3 billion) to help pare debt. The Brazilian operations were labeled as core assets.

Related News: Telecom Italia Plans to Raise $5.4 Billion to Reduce Debt

“Tim is not an expensive stock, so if Telecom Italia was to sell it, it’d probably get a significant premium over current prices,” Luis Gustavo Pereira, a strategist at Futura Corretora brokerage in Sao Paulo, said in a phone interview. “Now that a sale seems less likely, the impact on the stock is negative.”

Tim trades at about 17 times its earnings, which compares with a telecommunications industry average of 30 times, according to data compiled by Bloomberg.

A buyer of a controlling stake in Tim would have to offer to buy out minority shareholders for the same price offered to Telecom Italia, according to the rules of Novo Mercado, the exchange’s segment where the stock is traded and which has higher standards of corporate governance.

To contact the reporter on this story: Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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