Telecom Italia to Discuss GVT Bid, Weighs Sawiris Offer

Telecom Italia Board to Discuss GVT Bid, Weigh Sawiris Offer
A sign sits above the entrance to Telecom Italia SpA's headquarters in Milan. Photographer: Alessia Pierdomenico/Bloomberg

Telecom Italia SpA’s board will meet to discuss a potential bid for Vivendi SA’s Brazilian phone unit GVT next month, while also considering whether to accept billionaire Naguib Sawiris’s offer to buy a stake.

“If we wanted to make a quantum jump, the opportunity is big,” Telecom Italia Chief Operating Officer Marco Patuano said yesterday at an event organized by Morgan Stanley in Barcelona. “An asset like this is for sale once every I don’t know how many years.”

GVT, which Vivendi bought in 2009 after trumping a bid from Telefonica SA, is valued at 6 billion euros ($7.6 billion) to 7 billion euros, according to Sanford C. Bernstein analyst Claudio Aspesi. Vivendi has hired Rothschild and Deutsche Bank AG to study options for GVT, and DirecTV is among companies evaluating a bid, people familiar with the matter said in September. Paris-based Vivendi is seeking at least 7 billion euros, said one person, who asked not to be identified because the discussions are confidential.

“It’s mandatory for the board to consider this possibility, and if the board considers it’s interesting, then we have to evaluate how, and then Mr. Sawiris’s offer is an alternative,” Patuano said yesterday, referring to a board meeting on Dec. 6.

The gathering had been scheduled irrespective of discussions about GVT, a Telecom Italia representative said.

Sawiris Letter

Telecom Italia fell 4.5 percent to 68 cents at 4:23 p.m. in Milan. The company said in a statement it’s still reviewing a possible spinoff of its fixed-line network, after Il Sole 24 reported that the plan may be called off as talks with state lender Cassa Depositi e Prestiti SpA about an investment in the network reached a “dead end.”

A representative at Cassa Depositi declined to comment.

The carrier’s board last week received a letter from Sawiris expressing interest in acquiring new shares in Milan-based Telecom Italia, but didn’t discuss “any kind of detail,” Patuano said. If the board says that GVT is too expensive or there aren’t enough synergies and decides not to proceed, “at that time it’s clear we don’t have such a need” to raise funds, he said.

Patuano declined to comment on the size of Sawiris’s potential investment, saying that would be “implying a level of discussions that’s not the case.”

Sawiris may invest more than 2 billion euros in Telecom Italia, a person familiar with the matter said this week.

Stake Dilution

A sale of new shares would dilute the stakes held by Madrid-based Telefonica, Assicurazioni Generali SpA, Mediobanca SpA and Intesa Sanpaolo SpA, which together own about 22 percent of Telecom Italia through holding company Telco SpA.

Angel Vila, Telefonica’s finance chief, said at the same event in Barcelona this week that he doesn’t expect Telecom Italia will need a capital increase.

Telefonica, Spain’s biggest phone company, and Telecom Italia compete in Brazil, where they control the top mobile carriers by subscribers, and in Argentina.

Patuano reiterated that Telecom Italia’s priority is to deleverage, which the company can do with its free cash flow. Telecom Italia has a debt pile that is more than twice its market value. It targets adjusted net debt at the end of this year to drop to 27.5 billion euros ($35 billion) from 29.5 billion euros at the end of September.

Sawiris made his first major venture into Italy in 2005, when he bought Wind Telecomunicazioni SpA, the country’s third-largest mobile-phone provider.

Telecom Italia is working on transferring technology for content like music and videos as well as on-demand services from its home market to help generate higher sales in its South American markets, Patuano said.

Separately, the carrier expects a second round of offers for its Telecom Italia Media unit at the beginning of next month, before the scheduled board meeting, the executive said.

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