01/05/2007


What's gonna change with the entrance of Telefonica in Telecom Italia?

 

Telefonica and italian banks published in 04/28/07 the acquisition of Olímpia, Telecom Italia's controller, for 4.1 billion Euros. With Pirelli out, a trust was formed and will have 23.6% of Telecom Italia: 18% Olímpia, 1,54% Mediobanca and 4,06% Generalli. The shares of this trust will be divided: Telefonica (42,3%), Generalli (28,2%), Mediobanca (10,7%), Intesa (10,7%) and Benetton's family (8,2%).

 

Telefonica will have 10% of Telecom Italia's shares and will get the right of both chairs in the board of directors. The enterprises will keep being managed independently. Although, Telecom Italia could be considered as an enterprise of the same group of Telefonica, the only operator of its control group.

 

The preference of Pirelli for Telefonica, in detriment of the trust done by America Móvil, most of it, is because of Italian gorvernment pressures. Telecom Italia is the first between big operators who were monopolists in Europe, not having the control of national groups in its hands.

 

Consult: Telecom Italia's sales and the future of national operators.

 

The main advantages of this acquisition to Telefonica are:

  • Consolidates Telefonica as one of the biggest telecom groups in Europe and in the World.
  • Avoid it to get in America Movil's hands, its main competitor in Latin America

Telefonica will have to solve the debt of 40.6 billion Euros (2006) of Telecom Italia and face out regalatory problems in Brazil and Argentina, where Telefonica Itália are competitors in the market.

 

Brazil

 

Telefonica/Vivo is teh biggest telecommunication group in Brazil. With the incorporation of Tim this group would have gross revenue of 50.5 billion.

 

-
R$ Billions
Gross Revenue
1
Telefonica/Vivo
36.6
2
Telemar (Oi)
24.2
3
América Móvil/Telmex*
24.2
4
BrT
15.1
5
Tim
13.9

*Nowadays América Móvil is the controller of Telmex and cell phone operators of the Group. In Brazil the group controls Claro and Embratel. It also have a participation at Net that acquired Vivax.

 

Vivo and Tim

 

The change in the control of Telecom Italia must be reported to Anatel, Telecom Italia has 81% of ordinary shares of Tim Participações in Brazil. In case of Telefonica be part of the control group of Tim in Brazil, Anatel must give 18 months to Telefonica so it can be able to solve its problems of authorizations overposition between Vivo and Tim.

 

In this situation the best solution to Telefonica would be the join venture of Vivo with Tim a new operator with 54.2% of the cellulars of Brazil.

 

 

This joint venture would be negotiated with Portugal Telecom that could sell its participation at Vivo or continue with the participation in this new operator. This joint venture would be approved by Anatel and CADE.

 

Another solution would be Telefonica out of Vivo with the sale of its participation to Portugal Telecom, or other investors.

 

Telefonica and Brasil Telecom

 

Telecom Italia, even getting 38% of Solpart, controller of Brasil Telecom, don't participate in the operators control. These shares are in Trust, done by Credit Suisse, and were put on sale.

 

This sale can be late and block a possible joint venture of Telemar and Brasil Telecom. In case os suspension of legal intents that forbids the joint venture of fixed telephony concessionaires, Telefonica would also be able to get in control of BrT.

 

It's important to point that even with this change in the regulation tom allow the joint venture of fixed telephony concessionaires, any similar operation would have to be approved by CADE.

 

Argentina

 

A joint venture of Telefonica with Telecom Italia in Argentina would create a group with 62.3% of the cell phones and almost 100% fixed accesses in service (2006), would be difficult its approval by regulatory without establishment of some restrictions.

 

 

 

You could ask :

  • Will Vivo and Tim joint? Or Telefonica will get out of Vivo?
  • With this operation Telefonica avoid the entrance of América Móvil in the european market and strengthened its position in Latin América. What will be the reaction of América Móvil (Claro)?
  • What are the consequences in the operation of Tim, Vivo and BrT in Brazil? And for 3G implantation?
  • This situation make much easier a joint venture between Telemar and BrT?
  • Who's gonna buy Telemig Celular?

 

Comment.

 

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