Telecom Italia Said to Value Tim Stake at $16.8 Billion

By Daniele Lepido

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Telecom Italia SpA (TIT) wants at least 13 billion euros ($16.8 billion) for its controlling stake in Tim Participacoes SA (TIMP3), the Brazilian mobile-phone operator that has attracted the interest of Oi SA (OIBR4) and America Movil SAB (AMXL), two people familiar with the matter said.
That price would give Tim a total enterprise value of about 20 billion euros, about 73 percent more than its value at yesterday’s close in Sao Paulo. The price would be 11 times Tim’s 2013 earnings before interest, taxes, depreciation and amortization, similar to what Telefonica (TEF) SA offered for Brazil’s GVT last month, said the people, who asked not to be identified because the matter is private. Telecom Italia shares jumped.
Oi, a wireless carrier competing with Tim in Brazil, said in August it was considering an offer for its rival, and America Movil said yesterday it plans to
enter talks to make a joint bid with Oi. Telecom Italia Chief Executive Officer Marco Patuano has sold assets and scrapped the dividend as he looks for new areas of growth to rejuvenate the indebted company.
Telecom Italia, based in Milan, hasn’t started a process to sell Tim, said the people. Patuano said last week that Tim is a “core asset” and the company will speed up investments in Brazil to improve its mobile-broadband networks.

Photographer: Alessia Pierdomenico/Bloomberg

Telecom Italia Chief Executive Officer Marco Patuano has sold assets and scrapped the... Read More

A Telecom Italia spokesman declined to comment.
Telecom Italia, which owns about 67 percent of Tim, last month lost out to Telefonica SA in a bidding war over broadband carrier GVT. Vivendi SA, GVT’s owner, entered exclusive talks with Telefonica over a sale of the business.

Brazil Market

Telecom Italia extended gains in Milan trading, rising as much as 4.9 percent to a two-month high. Telefonica fell 0.3 percent to 12.33 euros in Madrid.
A takeover would let America Movil and Oi gain market share in Brazil by dividing the assets of the nation’s second-largest mobile-phone carrier between them. America Movil, controlled by billionaire Carlos Slim, hasn’t reached a final agreement to enter talks for Tim, Chief Financial Officer Carlos Garcia-Moreno said yesterday in a phone interview.
Oi has also been seeking to draft Telefonica, Brazil’s biggest wireless company, into a joint bid for Tim, people familiar with the matter said last month.

Debt Load

Telecom Italia has said it’s looking for growth opportunities in Brazil rather than a buyer for Tim. The company could still use the unit as a vehicle to acquire other businesses in the country, a person familiar with the matter said last month.
Yet the Italian carrier’s debt burden has already caused it to sell assets and scrap its dividend. Telecom Italia’s credit rating was cut to junk by Standard & Poor’s and Moody’s Investors Service last year, and the company’s net debt of about 27.4 billion euros at the end of June exceeds its market value.
Tim shares gained 6.2 percent to 13.28 reais yesterday in Sao Paulo trading, the highest closing price since June 26. Oi fell 0.6 percent to 1.59 reais. Mexico City-based America Movil rose 1.3 percent to 17.39 pesos.
Oi, based in Rio de Janeiro, said in August it had hired Banco BTG Pactual SA to act as a special purpose vehicle that can acquire assets on its behalf, “with the purpose of enabling a viable proposal for the acquisition of shares of Tim.”