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Telecom Italia Brazil Towers Said to Attract Goldman Firm

A Goldman Sachs Group Inc.-backed company and American Tower Corp. (AMT) are among those seeking to buy Telecom Italia SpA (TIT)’s mobile-phone towers in Brazil, according to people familiar with the matter.

Goldman’s Cell Site Solutions Cessao de Infraestruturas SA and American Tower are among potential buyers that have sent letters of interest to the Italian carrier, said the people, asking not to be named because the talks are private. Telecom Italia, which is working with Morgan Stanley to sell the assets, values them at about 750 million euros ($1 billion), one of the people said.

Brazilian mobile carriers are farming out the ownership and maintenance of towers, then leasing space on them, to focus on adding network capacity as demand for wireless Internet access increases. Telecom Italia, which is selling about 6,000 towers in Brazil, has also disposed of other assets and scrapped dividends to cut debt.

“Wireless-tower divestitures are a necessary tactic for all phone carriers, which need to recover cash and focus investments on stronger fiber, fixed-line networks,” said Massimiliano Trovato, a media and telecommunications analyst at Bruno Leoni Institute, an economic think tank. “This move makes even more sense for Telecom Italia since I remain convinced the Italian operator sooner or later will exit the Brazilian market, and this is a potential first step in that direction.”

Expanding Investments

Telecom Italia, based in Milan, said last week it expects non-binding offers for the Brazil towers by the end of May. The company owns a total of about 8,500 towers through its Tim Participacoes SA (TIMP3) unit. Tim Chief Executive Officer Rodrigo Abreu said the tower sale process is ongoing, and there aren’t plans to sell the company itself.

“There is no offer of any kind to buy Tim,” Abreu said to reporters in Brasilia today. “There has been no solicitation and there are no negotiations.”

Goldman and JPMorgan Chase & Co.’s Gavea Investimentos Ltda., the Brazilian hedge-fund firm founded by former central bank president Arminio Fraga, unveiled tower-investment company Cell Site Solutions last year. Tower companies such as SBA Communications Corp. (SBAC) and Boston-based American Tower have also been expanding in the past two years.

Representatives of Telecom Italia, Cell Site Solutions, American Tower and Morgan Stanley declined to comment.

Telecom Italia shares fell 1.6 percent to 84 cents at the close in Milan, giving the company a market value of 15.2 billion euros. The shares briefly recovered their losses after Bloomberg’s report on the interest in the towers before declining again.

New Towers

SBA, based in Boca Raton, Florida, agreed in December to pay 1.53 billion reais ($693 million) for 2,007 Oi SA towers, or about 760,000 reais per tower -- more than twice the price it paid for a previous acquisition of other Oi towers, according to Wells Fargo & Co.

“SBA would be interested in evaluating the potential to increase its Brazilian portfolio through additional M&A,” the company said in an e-mailed response to questions.

Additional capacity is also needed as demand for mobile services soars, with one tower builder estimating that 6,680 new units are required this year alone. Goldman, Patria Investimentos SA -- a firm that includes Blackstone Group LP among its investors -- and at least six other private-equity firms are backing five local tower builders to benefit from the rising demand.

To contact the reporters on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net; Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net; Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Peter Eichenbaum at peichenbaum@bloomberg.net Crayton Harrison, James Callan

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