MILAN BlackRock Inc (BLK.N) will have to say on Monday what stake it holds in Italy's biggest telecom operator Telecom Italia (TLIT.MI), after the Italian market watchdog threatened to fine it for not disclosing an increase.
At the end of November, the world's largest money manager lifted its combined holding in the phone company to 10.1 percent from the 5.1 percent it held in October, according to filings it made to the U.S. Securities and Exchange Commission (SEC).
Crossing the 10 percent threshold obliges the company to notify regulators, according to Italian market rules.
If confirmed, the 10.1 stake would make BlackRock the second biggest shareholder in Telecom Italia by far after holding company Telco, and give it a potentially pivotal role in Friday's shareholder vote on whether to oust the board of the Italian company.
BlackRock informed the SEC at the beginning of December, but it did not tell Italian market watchdog Consob within a five-day deadline from the stake increase as required, the watchdog's chief said on Sunday.
"Our immediate reaction is the sanction procedure; we can impose a fine of a maximum 500,000 euros ($700,000)," Consob head Giuseppe Vegas told daily Il Sole 24 Ore on Sunday.
The Italian regulator has told the U.S. group to make a statement on the size of its holding ahead of the Italian market opening on Monday and on what its intentions are at the shareholder meeting, Vegas told the newspaper.
A source familiar with the matter said BlackRock was still in compliance with Italian law, as its stake only exceeded the 10 percent threshold if Telecom Italia convertible bonds the investor bought were included, and such bonds do not count as equity holdings outside the United States.
The U.S. investor will clarify the details of its holding on Monday, the source added. BlackRock declined to comment on Sunday.
According to Vegas, BlackRock had bought 3.56 percent in Telecom Italia between October 2 and December 13. It was not clear if this was on top of the 10.1 percent stake communicated to the SEC or of the 5.1 percent holding disclosed to Italian authorities in October.
Consob is also trying to ascertain whether BlackRock acted on its own, or in agreement with other parties, including Telefonica (TEF.MC).
The Spanish group owns the majority of Telco, a holding company which controls Telecom Italia with a 22.4 percent stake. Italian banks Mediobanca (MDBI.MI) and Intesa Sanpaolo (ISP.MI), and insurer Generali (GASI.MI) are also investors in Telco.
BlackRock's investment would allow it to overtake rebel Italian businessman Marco Fossati, who owns 5 percent.
The size of BlackRock's holding and any possible dealings with Telefonica are crucial because Italian legislation forces any investor or alliance buying a 30 percent stake in a company to launch a mandatory takeover offer on minority holdings.
The BlackRock stake increase could also potentially tip the balance at the shareholder meeting over the future of the phone company's board, which is in question because of complaints of a conflict of interest and the possible sale of its prized Brazilian unit TIM Participações SA (TIMP3.SA).
Fossati and small shareholders group ASATI are seeking the dismissal of the board, saying it favors the interests of core shareholders such as Telefonica, which has a deal to gradually take over the holding company from its Italian investors.
Telco is expected to hold talks on Thursday to prepare its strategy ahead of the shareholder vote.
Consob has asked Telecom Italia to make a statement on when it was informed by BlackRock about its investment and said Telco should give explanations regarding its candidates should the current board be revoked. ($1 = 0.7283 euros)