* TIM Participacoes, GVT merger not on agenda for now
* Patuano met Brazilian president to discuss investment
* Telecom Italia shares down 0.6 pct, TIM up 1 pct
(Recasts with CEO Patuano comments, details)
By Leonardo Goy and Danilo Masoni
BRASILIA/MILAN, July 23 Telecom Italia
does not rule out merging its Brazilian operator with a local
rival but such a move is not on the agenda for now, its chief
executive said after meeting Brazil's president on Wednesday.
The meeting between Telecom Italia CEO Marco Patuano and
Brazilan President Dilma Rousseff, who faces a tight race to win
elections in October, came amid persistent talk of consolidation
in the local telecoms market.
"We can't rule out anything but we are not focused on this
at the moment," Patuano told reporters when asked about talk of
a potential tie-up between its TIM Participacoes unit
and broadband carrier GVT, a unit of France's Vivendi.
Brazilian anti-trust authorities are concerned about
possible conflicts of interest in the local mobile market, given
that Spain's Telefonica SA has a direct and indirect
stake in the two biggest mobile firms in Brazil.
Telefonica owns Vivo, the number one mobile firm,
but is also the largest shareholder in Telecom Italia. The
Italian firm in turn owns 67 percent of TIM, which is the second
largest mobile operator with a 27 percent market share.
Telefonica has been asked by the antitrust authorities to
resolve what they see as this conflict of interest by mid-2015,
prompting widespread speculation about possible mergers and
breakups in the Brazilian telecoms market.
Telefonica's preference has been to try and reduce the
number of players in the Brazilian mobile market from four to
three by engineering the break-up of TIM, sources said earlier.
That would require teaming up with local rivals Oi
and America Movil to somehow jointly buy
TIM and divide its assets among them.
Such a break-up would need political approval and would be
technically difficult to carry out. Telefonica had hoped Oi
would lead the joint bid since it is the only Brazilian company
involved, the sources said.
Telecom Italia, however, is in favour of keeping its stake
in TIM because it accounts for one third of its sales, but does
not rule out a sale, Chairman Giuseppe Recchi said earlier this
A merger between TIM and Vivendi's GVT could be a headache
for Telefonica because it would create a stronger competitor to
its local unit Vivo.
Other Telecom Italia shareholders, led by businessman Marco
Fossati who owns nearly 5 percent of the Italian group, say
merging TIM with GVT would create more value.
Italian newspaper Il Sole 24 Ore said one of the reasons for
Patuano's visit to Brazil was his interest in a possible tie up
with GVT to bolster TIM's broadband capabilities.
Vivendi, which has been selling telecom assets to focus on
its media businesses, has so far said that it wants to keep GVT.
Last week, TIM denied being in talks with rivals Grupo Oi SA
and GVT for a combination or a takeover.
By 1517 GMT, Telecom Italia shares were down 0.6 percent at
0.874 euros in Milan, underperforming a 0.1 percent rise in the
European telecoms index. Shares in TIM rose 1 percent.
Brazilian authorities are also pushing for more investment
to upgrade the telecommunications infrastructure of the country.
A government auction of licences for 700-megahertz spectrum
for fourth-generation mobile data services is expected by
September. Patuano said TIM planned to participate in the
auction while focusing on executing its business plan.
(Reporting by Leonardo Goy, Danilo Masoni and Leila Abboud;
editing by David Clarke)