Telefonica increases stake in Telco to control Telecom Italia

By Marc Castro

Sep 25, 2013 08:26 AM EDT

Telefonica, the telecommunications group from Spain, had formalized a deal to secure control of Telecom Italia without the need to launch a full takeover. The deal is done through a multi part EUR860 million or USD1.2 billion cash and share deal.

The deal allows the increase of Telefonica's stake in Telco, the holdings company which owns 22% of the beleaguered Italian telecommunications firm. The shares of the other members of the venture, namely Intesa Sanpaolo, Generali and Mediobanca would bow out gradually.

Telefonica, whose debt had recently topped EUR50 billion or USD67.5 billion, is consolidating its hold over Telecom Italia, especially that it is deeply interested with the Brazilian mobile unit Tim Participacoes. This deal would also need to clear the review of Brazilian regulators, which is expected to divest its ownership of TIM Participacoes once Telefonica acquires full ownership of Telco. This was confirmed by a source at the office of the Brazilian regulator Anatel who shared the information with Reuters.

In a statement issued by Telefonica in Brazil, it said an initial capital increase involving only preferential shares and not voting rights. This would result in little change in Telco in accordance with rules set by Anatel. Should any other capital increases occur, there would still be a need to seek regulatory approval.

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