Telecom Italia seeks third way over Brazil, as rebel investor gains support

Telecoms Emea

January 16, 2014 | By Anne Morris

Telecom Italia said it will implement "enhanced" controls on any dealings related to its Brazilian business as the company seeks to create a more independent approach to evaluating any potential sale of Tim Brasil.

While it stressed that there is no offer on the table for Tim Brasil and said talks on a sale are not underway, Telecom Italia said its board of directors has "approved to define an ad hoc procedure, in line with that for operations with related parties…to manage any possible extraordinary operation involving Telecom Italia holdings in the companies of the Tim Brasil group."

The decision was made during a company board meeting on Thursday.

Reuters noted that this means any sale would require a review by a committee of independent board members, and would leave Telefónica out of the vote if the Spanish group were identified as a related party.

The move reflects the Italian company's desire to distance itself from claims of conflicts of interest between Telefónica and Telecom Italia.

Minority Telecom Italia shareholders including Findim owner Marco Fossati believe that Telefónica, which has agreed to a gradual takeover of Telecom Italia through the Telco shareholder vehicle, could force a sale of Tim Brasil to strengthen its own Vivo unit in the South American country.

Fossati narrowly lost a bid in December last year to gain shareholder approval for the removal of Telecom Italia's entire board.

"Telecom Italia chief executive [Marco] Patuano learned a lesson at the December shareholders meeting and is trying to get maximum transparency and accountability if in the future any offer comes for Brazilian assets," Carlo Alberto Carnevale Maffe, a professor of business strategy at Milan's Bocconi University, told Bloomberg.

Fossati has also reportedly warned Telecom Italia to be careful over evaluating any possible acquisition proposal for Tim Brasil, which he estimates to be worth more than €30 billion (US$40 billion).

It is also understood that Fossati is pushing for increased representation of minority shareholders on the Telecom Italia board to reduce the influence of Telco and Telefónica. According to Bloomberg, Fossati wants to strip Telco's power to name four-fifths of board members in favour of a system that allocates seats based on the size of their stakes.

Quoting unidentified sources, Bloomberg added that Telecom Italia's CEO Marco Patuano supports the campaign by minority investors to have greater representation on the board.

Also at Thursday's board meeting, Telecom Italia said it would continue to discuss governance matters at another board meeting on Feb. 6.

For more:
- see this Telecom Italia release
- see this Reuters article
- see this Bloomberg article
- see this separate Reuters article
- see this separate Bloomberg article

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