MILAN Telecom Italia (TLIT.MI) agreed to sell its controlling 22.7 percent stake in Telecom Argentina (TEC2.BA) to Fintech Group for $960 million, as it presses on with a plan to raise 4 billion euros to fix its balance sheet and revive its business.
Telecom Italia said in a statement on Thursday the sale to the U.S.-based investment fund was not expected to have a significant impact on its consolidated net debt amounting to 28 billion euros ($38 billion).
Later on Thursday, Standard & Poor's cut Telecom Italia's credit rating by one notch to 'BB+' with a negative outlook, citing the company's persistent high debt and expectations of continued pressure on growth in its Italian home market.
The ratings downgrade means that Telecom Italia, which faces peak debt maturities in 2014, has lost its investment grade status, making it more expensive for the company to borrow money.
"Telecom Italia will likely continue to face tough competitive, economic, and regulatory environments in Italy," the ratings agency said.
Fintech, owned by Mexican businessman David Martinez, plans to launch a tender offer for remaining shares in Telecom Argentina.
"We see tremendous opportunities for growth in the Argentine market and we will pursue a major investment program to take advantage of them," Martinez said in a statement.
Shares in Telecom Italia ended 0.15 percent lower on the Milan stock exchange, while Telecom Argentina was trading up 2.3 percent in Buenos Aires at 1830 GMT.
The Argentina deal has been criticized by some minority investors in Telecom Italia, as well as by Italian politicians who say the sale favors the interests of its main shareholder, Spanish competitor Telefonica (TEF.MC), which is also active in Argentina.
Telefonica struck a deal in September to gradually take over its Italian rival by buying out co-shareholders in Telco, the holding company that controls Telecom Italia. The deal is being looked at by Italian market regulator Consob.
But in a Thursday interview Telefonica Chairman Cesar Alierta said the Spanish group had no plans to take control of Telecom Italia.
Italian centre-left senator Massimo Mucchetti, who is pushing for a new takeover law that may force Telefonica to buy out Telecom Italia, said Telecom Argentina was sold "for a song". ($1 = 0.7430 euros)
(Reporting by Valentina Za and Danilo Masoni with additional reporting by Guido Nejamkis in Buenos Aires; Editing by Anthony Barker)