Marco Patuano, the CEO of Telecom Italia (TI), proposed a merger of his company’s Brazilian operator business with Vivendi’s fixed unit in the country, according to The Wall Street Journal.
According to sources, Patuano outlined a plan to merge TIM Participacoes with GVT in a meeting with Vincent Bollore, chairman of the French media group.
Patuano is believed to have offered Vivendi a stake in TI as part of the proposed deal. The Italian company would also help distribute Vivendi’s media content in Brazil and Italy, the source said.
The proposal is understood to have been put together with the help of advisers MediaBanca, Banco Bradesco and Citigroup.
The move comes after Telefonica, a rival and shareholder of Telecom Italia, made a €6.7 billion bid for GVT last week. Telefonica is also offering Vivendi an 8 per cent stake in TI, which the Spanish player currently owns.
Vivendi will discuss the proposal at its next board meeting, along with the Telefonica bid. The company, which is moving away from the telecoms sector to focus on its media assets, has previously said it will evaluate offers related to GVT, which offers broadband, pay TV and fixed telecom services.
Paul Marsh, analyst with Berenberg, told The Wall Street Journal that an acquisition of GVT by Telefonica would leave TIM “strategically challenged”. TI’s home market has proved troublesome in recent years, so further changes in Brazil, its other main market, could be damaging.
Vincent Bollore, Vivendi’s largest single shareholder (Bollore Group owns 5.04 per cent) and chairman since June, is unlikely to reverse the company’s strategic shift away from telecoms and towards media. But he does want to maintain a foothold in the telecoms industry with minority stakes that would also enable Vivendi to deliver its content over partner networks.
Telefonica’s bid is likely to have been partly motivated by a desire to ease its regulatory position in Brazil.
Brazilian anti-trust watchdog Cade said last year that Telefonica must completely exit TIM Brasil (majority owned by TI) or get a new partner for Vivo, its mobile subsidiary, if it wants to maintain control of its own unit in Brazil.
Brazil’s four-strong mobile market is led by Vivo, which had 76.4 million connections at the end of the second quarter, according to GSMA Intelligence figures. TIM had 72.8 million connections, ahead of America Movil’s Claro (65.0 million) and Oi (51.1 million).
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