Sawiris Ties Interest in Telecom Italia to Telefonica’s Exit

Egyptian billionaire Naguib Sawiris is ready to step in and invest in Telecom Italia SpA on condition that the carrier’s largest shareholder, Telefonica SA (TIT), would exit, he said in an interview.

More than a year after Sawiris was rebuffed in his offer to acquire a stake in Italy’s biggest phone company for at least 2 billion euros ($2.7 billion), the businessman is again circling the carrier, now under new chief executive officer Marco Patuano. Spain’s Telefonica, having increased its indirect holding in Telecom Italia, is under pressure from Brazilian regulators to resolve potential conflicts of interest in the country, where both companies own a major carrier.

“I am still interested in Telecom Italia but only on two conditions: that Telefonica exits and that Telecom Italia does not sell Brazil,” he said by telephone yesterday. He declined to discuss how much he is willing to invest. “From a financial point of view, Telecom Italia still needs a massive 3 to 4 billion euros capital increase.”

A return of Sawiris would mark a comeback for a businessman who helped shape Italy’s phone industry. He ventured into the country in 2005, when he bought wireless carrier Wind in a 12.2 billion-euro deal from utility company Enel SpA. He sold Wind to VimpelCom Ltd. in 2011.

Photographer: Simon Dawson/Bloomberg

Egyptian billionaire Naguib Sawiris, reacts during a Bloomberg Television interview in London, on May 24, 2012. Close

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Photographer: Simon Dawson/Bloomberg

Egyptian billionaire Naguib Sawiris, reacts during a Bloomberg Television interview in London, on May 24, 2012.

Strategic Asset

Speaking to reporters in Milan today, Patuano said there is no “hypothesis” for a capital increase. Telecom Italia shares rose as much as 3.3 percent to 82.2 cents at 3:35 p.m. in Milan, valuing the carrier at 14.8 billion euros.

Sawiris said in the interview that Telecom Italia should hold onto its stake in Tim Participacoes SA (TIMP3), the Brazilian carrier whose market value has jumped almost 50 percent to $13 billion in the past 12 months. Telefonica, which controls Telefonica Brasil SA (VIVT4), is keen to push Telecom Italia to sell Tim or break up the unit among the country’s carriers, people familiar with the matter have said.

Under Patuano, who replaced Franco Bernabe in October, Telecom Italia has repeatedly said Brazil is a strategic asset. Directors this month proposed putting in place controls for an eventual deal involving Tim as well as changes in corporate governance, as the CEO finds ways to reduce the junk-rated carrier’s $38 billion debt pile and revive its Italian business.

“I think it’s not good for Telecom Italia to dispose its stake in Tim Brasil,” Sawiris said. “It does not make any sense to me, because it will reduce the carrier to a regional company only focused on Italy. In case they decide to sell Tim Brasil I am interested in making an offer.”

No Talks

The businessman stressed that he isn’t considering an unsolicited bid for Tim and he hasn’t held discussions with either Telecom Italia or Telefonica. Brazil’s government would possibly support him in the event of a bid for Tim, he said.

A representatives for Madrid-based Telefonica declined to comment.

Before today, Telecom Italia’s stock had jumped 23 percent since Patuano took over as CEO, and was about 13 percent higher than in December 2012, when the Milan-based company rejected Sawiris’s offer.

“Sawiris is short Telecom Italia and he has a huge personal interest,” said Robin Bienenstock, an analyst at Sanford C. Bernstein in London. “But the truth is that with or without the sale of Tim Brasil, Telecom Italia no longer needs a rights issue but simply to be better managed and needs its governance to be sorted out once and for all. This won’t happen with Mr. Sawiris.”

The billionaire recently suffered a setback in North America. In October, Canada cited national security concerns in turning down Manitoba Telecom Services Inc.’s C$520 million ($467 million) sale of its Allstream division to an investment firm co-founded by Sawiris.

Orascom Telecom Media & Technology SAE, the company founded by Sawiris, is trading at the highest price in 18 months in Cairo amid speculation of a dividend payout and investment by the billionaire.

To contact the reporter on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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