Telefonica CEO Quits Telecom Italia Board on Brazil Conflict
Telefonica SA (TEF) Chief Executive Officer Cesar Alierta and a former executive stepped down from Telecom Italia SpA (TIT)’s board to avoid perceived conflicts of interest in Brazil, where the two carriers compete.
Alierta and Julio Linares, a former chief operating officer, resigned with immediate effect as Telefonica considers legal action against a ruling by Brazilian antitrust authorities that it must reduce its influence in the country’s telecommunications market, the Madrid-based company said yesterday.
The Cade watchdog last week fined Telefonica and ordered it to reduce its Brazilian holdings or convince Telecom Italia to sell its local unit. That decision followed a September agreement by Telefonica to gradually increase its stake in the holding company that is Telecom Italia’s largest shareholder.
“Alierta and Linares’s move makes sense as it not only addresses immediately Cade’s decision but also tries to prove to Italian market regulator Consob that Telefonica isn’t in a conflict of interest,” Andrea Giuricin, a professor who specializes in media and telecommunications at Milan Bicocca University, said in a phone interview.
In an e-mailed statement, Cade said it won’t comment on Telefonica’s decision, adding that its verdict last week has the backing of Brazilian laws.
Cade is seeking to reduce Telefonica’s position in the Brazilian phone market to its pre-2010 level. At that time Telefonica held half of wireless carrier Vivo and a minority stake in Telco SpA, the company that owns 22.4 percent of Telecom Italia.
Vivo and Telecom Italia’s Tim Participacoes SA (TIMP3) together control more than half of Brazil’s wireless market. If Telefonica can’t undo either its 2010 buyout of Vivo, or the agreement to take over Telco, Telecom Italia could address Cade’s concerns by selling Tim, the agency said last week.
A Telefonica spokesman declined to comment beyond its statement. In a separate release, Telecom Italia said it received the Telefonica representatives’ resignation letters.
Alierta and Linares previously used to leave the room when Brazil was discussed during Telecom Italia board meetings.
Their resignations come as Telecom Italia shareholders are set to meet Dec. 20 to vote on a motion by a minority investor to remove the board. Marco Fossati’s Findim Group SA, which owns about 5 percent of Telecom Italia, said Telefonica and its Telco partners have too much influence over the Italian carrier.
BlackRock Inc. (BLK) has a stake of 10.14 percent in Telecom Italia, making it the second-largest investor in the carrier, according to a Nov. 29 Securities Exchange Commission filing. Telecom Italia has a market value of 12.1 billion euros ($16.7 billion).
Linares has also withdrawn from a list presented by Telco of candidates for re-election to Telecom Italia’s board, Telefonica said. The Spanish company has also decided not to exercise its right to name or propose two board members for Telecom Italia.
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