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Telecom Italia sells Telecom Argentina stake for $960m

Sale is part of Italian telco's plan to cut its debt burden.
Written by Eric Sylvers, Contributor on

Telecom Italia said Thursday that it will sell its stake in Telecom Argentina to Mexican billionaire David Martinez's Fintech Group for $960m as the incumbent Italian telco seeks to reduce its debt burden.

Last week as part of its industrial plan for 2014-2016, Telecom Italia announced a series of moves including the sale of assets and the placing of a convertible bond, to raise about €4bn.

In addition to the Telecom Argentina sale, the Italian company is planning to offload mobile towers in Italy and Brazil as well as the digital multiplexes of its domestic media unit.

The sale of Telecom Argentina and last week's successful placing of the $1.3bn convertible bond, come just a month after Marco Patuano took over as Telecom Italia's chief executive.

His predecessor, Franco Bernabe, had clashed with Telefonica, the Italian company’s largest shareholder and a competitor in Latin America. Telefonica recently raised its stake in Telco, which owns controlling 22 percent of Telecom Italia and nominates a majority of the company’s board members.

Telecom Italia said the sale of Telecom Argentina will not have a "material" effect on its net debt, which at €28.2bn is about equal to last year's revenue. Telecom Italia says its net debt will fall to €27bn by the end of the year.

Of the total sale price for Telecom Argentina, $860m is for Telecom Italia’s indirect 23 percent stake with the rest coming from the Italian company’s agreement to continue to provide technical support and other services to its soon-to-be former unit for up to three years, Telecom Italia said in a statement.

The crown jewel of Telecom Italia's foreign holdings, its two-thirds stake in Brazilian unit Tim Participacoes, is not for sale. Telefonica, which has its own Brazilian unit that competes with Tim Participacoes, is said to be pushing for Telecom Italia to get out of Brazil. Telecom Italia's stake in the Brazilian company has a market value of about $8bn.

With the sale of Telecom Argentina, Telecom Italia loses about €3.8bn in annual sales, about 13 percent of its total, and an affiliate that has been growing rapidly in recent years, including an 18 percent rise in revenue in 2012. That is in stark contrast to the domestic business, which has been shrinking for years as price wars in Italy for both mobile and fixed-line services have led to a relentless drop in prices.

Telecom Italia has tried to hang onto the top end of the market, especially in mobile, with advertising that touts what it calls its superior services.

When announcing last week its plans to raise the €4bn, Telecom Italia also said it would invest a total of €9bn domestically over the next three years in superfast fibre broadband and mobile 4G infrastructure as well as new datacentres to support growth in cloud computing.

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