TIM Brasil Facing Possible Break-Up to Avoid Regulatory Clash
Published on: 3rd Jan 2014
By: Ian Mansfield
Spain's Telefonica is said to be working on a deal that would see the break up of Telecom Italia's Brazilian assets to deal with regulatory concerns about is cross shareholdings in the companies.
Telefonica, which has its own mobile network in Brazil is also an indirect 15% shareholder in TIM Brasil through its indirect holding in the Italian parent company. As such, the Brazilian regulators have instructed Telefonica to reduce its holding in one of the two companies or find another local partner to reduce its influence in the local market.
According to a report by the Il Sole 24 Ore newspaper, Telefonica is looking to set up a holding company with its two main rivals in the market which would then buy TIM Brazil and split the assets between them.
The report also suggested a level of regulatory approval may exist as state-owned banks may be providing some of the financing for the deal.
Countering the proposal is the ongoing, and oft-denied rumours that Telecom Italia may sell its entire stake in the Brazilian company in order to pay down its debts. While a break-up would achieve much the same aim, it would leave Telecom Italia more vulnerable to a full take over by Telefonica later.