MILAN--Italy's market regulator Consob Wednesday searched the
Milan offices of Telecom Italia (TIT.MI) to inspect the company's
plans to sell its Argentinian business and issue a convertible
bond, a person close to the matter said.
The search by Consob inspectors and Italian tax police was
prompted by allegations by some of Telecom Italia's minority
shareholders that the board wasn't making decisions in the
interests of all shareholders, but only those of Telco, the holding
company with the biggest stake in Italy's largest
telecommunications firm, which itself is partly owned by Telefonica
(TEF) of Spain.
Telecom Italia in a statement said it is cooperating with the
regulator and that it always acts within the law.
Last week, Telecom Italia's board decided to launch a 1.3
billion euro ($1.75 billion) mandatory convertible bond and to sell
the company's Argentinian unit, within a plan to cut the company's
debt. The Italian company said at the time it had received an offer
for its division in Argentina. According to people familiar with
the negotiations, Fintech Investments Ltd. made a $960 million
offer for the unit.
The sale is part of Telecom Italia's broader effort to raise
about EUR4 billion by 2016 to reduce its huge debt pile estimated
at some EUR28.2 billion. For years, the company's domestic business
has shrunk in the face of fierce competition and a protracted
economic downturn throughout Europe. Telecom Italia's finances
prompted ratings firm Moody's to cut its credit rating to below
investment-grade status in October.
The shareholders of Telco, which has a 22.4% stake in Telecom
Italia, are Intesa Sanpaolo SpA (ISP.MI), Mediobanca SpA (MB.MI),
Assicurazioni Generali (G.MI)and Telefonica. The Spanish telecom
operator said in September it plans to increase its stake in Telco,
which could raise its voting rights in Telecom Italia's board from
January following regulatory approval. As a result, Telefonica
could become the Italian operator's dominant shareholder.
For Telefonica to be able to increase its stake in Telecom
Italia, the Spanish company needs to resolve potential antitrust
issues in Argentina and Brazil, as both Telefonica and Telecom
Italia have assets there.
Yet, Telecom Italia's chief executive Marco Patuano said last
week that while the sale of Argentina's division is likely to go
ahead, the Italian company's Brazilian unit remains "core".
According to minority shareholder Findim, which owns roughly 5%
of Telecom Italia, Telefonica's increased stake in the Italian
company could lead to a strategy of asset disposals in Latin
America that wouldn't be in the interest of Telecom Italia.
Telecom Italia said the sale of Telecom Argentina, if approved
by Telecom Italia's board of directors, could be completed by
mid-2014. The Italian company recently reported a 27% fall in its
third-quarter net profit to EUR505 million from a year earlier.
Write to Manuela Mesco at manuela.mesco@wsj.com
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