Telecom Italia Puts Locks in Place to Manage Sale of Brazilian Subsidiary
Published on: 7th Feb 2014
By: Ian Mansfield
Telecom Italia has decided to put into place special procedures should it sell its Brazilian subsidiary and also cancelled plans to raise EUR3 billion in a hybrid bond issue.
A verbose statement from the company lacked any details about what the new procedure would be, but said that it would apply to any disposals by the company that are worth more than EUR2 billion (USD2.7 billion).
The company is under pressure to sell its majority stake in TIM Brazil, partly to pay down its heavy debt burden, but also to resolve the cross-shareholder conflict with Telefonica, which has indirect control of the company, but is also a competitor of it in Brazil.
If there were to be a sale of the Brazilian unit, Telefonica would be barred from voting on the sale due to its conflict of interest in the matter.
Telecom Italia also appointed Aldo Minucci as its new Chairman, without any changes to the existing powers vested in the CEO, Marco Patuano. He is however only expected to hold the position until a new board is chosen in April.
They also confirmed receipt of a review of their corporate governance, and will be studying it to see how the shareholder structure can be more normalised in line with most other companies.
At the moment, a small stake held through a holding company, Telco, can grant a shareholder much higher voting rights than their investment would have otherwise have granted. There has long been pressure on the company to resolve this anomaly.
The company also cancelled its EUR3 billion debt raising effort, after ratings agencies were unconvinced by the way it was structured. That may put more pressure on the company to raise fresh debt, or sell a large asset.