UPDATE 2-Telecom Italia CEO meets Vivendi's Bollore on GVT deal

Wed Aug 13, 2014 3:45pm EDT

(Adds details on deal under discussion)

By Gianluca Semeraro and Giselda Vagnoni

ROME/MILAN Aug 13 (Reuters) - Telecom Italia Chief Executive Marco Patuano met Vivendi chairman Vincent Bollore on Wednesday to discuss an offer for the French group's Brazilian broadband unit GVT, two sources with knowledge of the matter said.

Although no bid has yet been made, Telecom Italia is proposing to merge its Brazilian mobile business TIM Brasil with GVT, and in exchange Vivendi would take a stake in the Italian group, one of the sources said after the meeting.

In the deal structure being discussed, Telecom Italia would not launch a capital increase to finance the acquisition, the person added. It remains to be seen whether there will be a capital increase at TIM Brasil.

This counters predictions from analysts at Citigroup and other banks that a cash call would be needed to fund the acquisition of GVT. Telecom Italia has been carrying out asset disposals in Argentina and elsewhere to help fund costly network investments.

Telecom Italia, which is seeking to prevent rival bidder Telefonica from buying GVT, could put submit its offer to Vivendi by the end of the month, the person added.

Alberto Nagel, the CEO of Mediobanca, which is advising Telecom Italia, was present at the meeting which took place in Paris, said the source.

Telecom Italia and Vivendi declined to comment.

French billionaire Bollore, a long-standing investor in Italy, is a leading shareholder of Mediobanca, the influential investment bank that has for long been at the heart of Italy's high finance. Bollore is also the biggest shareholder of Vivendi with a 5 percent stake.

Mediobanca used to control Telecom Italia along with Telefonica and other financial players via the Telco holding company, which owns 22.45 percent of the company. Telco is being dissolved because Mediobanca, Generali, and Intesa want to sell their stakes in Telecom Italia.

Once Telco is dissolved, Mediobanca's stake in Telecom Italia will be 1.64 percent.

Sources told Reuters last week that Telecom Italia was in talks with Vivendi over a possible bid for GVT as it sought to head off a 6.7 billion euro ($8.9 billion) bid from Spanish rival Telefonica.

Telefonica is also Telecom Italia's biggest shareholder, and a competitor in mobile in Brazil.

Patuano had earlier pledged not to get drawn into a bidding war for GVT, saying after second-quarter results that he will not make any "crazy" acquisitions in Brazil.

The Latin American country is a crucial market for both Telecom Italia and Telefonica because it still has growth potential, in contrast to relatively saturated European markets.

A tie-up between TIM Brasil and GVT would create a stronger competitor to Telefonica's local unit Vivo. If Telefonica's bid succeeds, TIM Brasil's position would be weakened because it would remain the only mobile operator in Brazil without a large broadband business.

Italian newspaper Il Messaggero said on Wednesday Patuano would meet Bollore shortly to discuss "an equity and industrial alliance" between TIM Brasil and GVT.

Telefonica last week made an unexpected 6.7 billion euro bid for GVT, which gives Vivendi an option to take possession of an 8.3 percent stake in Telecom Italia from Telefonica. (1 US dollar = 0.7488 euro) (Reporting by Giselda Vagnoni and Gianluca Semeraro; Additional reporting by Stephen Jewkes; Editing by Erica Billingham, Pravin Char and David Evans)

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