Vivendi Said to Favor Review of Tim Brasil Sale; Shares Soar

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Vivendi SA, the biggest investor in Telecom Italia SpA, is in favor of the carrier exploring a sale of its Brazilian business to focus on its home market, according to people familiar with the matter. Tim Participacoes SA shares rose the most in six months.

While Vivendi doesn’t plan to be an activist shareholder, Chairman Vincent Bollore is keen to see Telecom Italia consider a disposal of Tim in the next two years and potentially merge Telecom Italia with a European rival in the medium term, said one of the people, who asked not to be identified because the deliberations are private.

While there isn’t a clear buyer, Telecom Italia is open to a sale of Tim if it creates value, said two of the people. Tim, also known as Tim Brasil, is the second-largest wireless carrier in Brazil, behind Telefonica SA’s local unit, and is 67 percent owned by Telecom Italia.

Tim jumped 5.7 percent to 10.53 reais in Sao Paulo on Thursday, the steepest increase since Dec. 10. The carrier has a market value of about $8.3 billion. Telecom Italia closed 4.1 percent higher at 1.16 euros in Milan for its biggest gains since March, valuing the company at 21.2 billion euros ($24 billion). Vivendi slipped 1 percent in Paris.

Vivendi intends to boost its Telecom Italia holding to as much as 15 percent in the coming days, people familiar with the matter said this week. Vivendi is getting an 8.3 percent stake as an eight-year-old shareholder pact that kept Italy’s dominant telecommunications company under the ownership of Telefonica and a group of financial investors unraveled.

Bloomberg News reported on April 27 that Bollore was considering buying more Telecom Italia shares.

Cost-Cut Program?

Such a move could be the first in a series of deals by Bollore, 63, to reinforce Vivendi’s presence in Italy and more broadly in southern Europe, said one of the people familiar with the billionaire’s thinking.

Bollore, who is behind a shakeup at Vivendi, wants Telecom Italia’s business plan to include a cost-cutting component, two of the people said. Although Telecom Italia’s sales are stagnating, the carrier’s profit margins, measured by earnings before interest, taxes, depreciation and amortization as a percentage of revenue, are higher than peers such as Deutsche Telekom AG and Orange SA, data compiled by Bloomberg showed.

Representatives for Paris-based Vivendi and Milan-based Telecom Italia declined to comment. Telecom Italia Chairman Giuseppe Recchi said as recently as in March that Tim is strategic and there is no plan to sell the division.

‘Good Opportunities’

In a statement Thursday, Tim said it was told by Telecom Italia that the business is strategic for the parent.

In Telecom Italia, Vivendi gains an ally with extensive broadband and wireless networks and tens of millions of customers. Vivendi, which owns France’s largest pay-TV provider Canal Plus, has said it’s seeking partners to help distribute its sports programs, TV series and music.

“Vivendi has a core business in a sector that’s complimentary to ours so I’m convinced we’ll have good opportunities to do things together,” Telecom Italia Chief Executive Officer Marco Patuano told reporters in Milan today.

At Vivendi, Bollore has largely dismantled the legacy of former CEO Jean-Bernard Levy, selling telecommunications assets in France, North Africa and Brazil as well as video-game maker Activision Blizzard Inc. Those sales have given Bollore ample financial resources to accomplish his stated goal of refocusing Vivendi on media and content.

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