Published on: 14th Jul 2014
Telefonica’s conflict of interest in Brazil may be heading closer to a resolution as the company is said to be considering a sale of its stake in Telecom Italia.
Telefonica directly owns a majority stake in one Brazilian mobile network, and through its indirect stake in Italy’s Telecom Italia, also has a stake in a rival Brazilian mobile network.
Telefonica has been ordered by the Brazilian regulators to reduce its effect market share to below 50 percent, and while the general expectation was for a break up of Telecom Italia’s local subsidiary, it may be Telefonica which does the selling instead.
A report in the Brazilian newspaper Folha de S. Paulo suggested that Telefonica is in talks with a number of investment funds to sell its stake in Telecom Italia.
The possibility of the sale emerged last month when Telefonica’s fellow shareholders in the holding company that controls Telecom Italia voted to disolve the company. That would reduce Telefonica’s stake to parity and eliminate its indirect control of the Italian firm.
Lacking control, the stake in Telecom Italia would be seen as purely an investment, and a poor one at that. Selling up would raise cash that Telefonica can use to pay down its own not insubstantial debt, while also resolving the regulatory headache in Brazil.
Telefonica’s 15% stake in Telecom Italia is worth around EUR3.4 billion.