* Aims to raise 9 bln euros from Brazil sale-source
* New CEO to present strategy on Nov 7
* Break-up of TIM is possible with bid from local rivals
* Telecom Italia, TIM shares rise more than 6 percent
By Danilo Masoni, Arno Schuetze and Guillermo Parra-Bernal
MILAN/FRANKFURT, Oct 9 Telecom Italia
is considering a sale of its 67 percent stake in Brazilian
mobile operator TIM Participacoes in a bid to reduce
its debt, said a person familiar with the matter on Wednesday.
The Italian operator, which was downgraded to junk on
Tuesday by Moody's credit rating agency, aims to raise at least
9 billion euros ($12 billion) from the sale, the person
A sale of the Brazilian business is one option being looked
at by Telecom Italia's new chief executive, Marco Patuano, who
is expected to present his strategy to the board on November 7.
Analysts say Patuano must find a way to cut its debt of
almost 29 billion euros and turn around the faltering domestic
No banks have yet been mandated for a Brazilian sale,
several sources familiar with the situation said, and any deal
would be complex given the market realities in Brazil and
The company also denied it has started a sale process.
"Telecom Italia specifies that there is no formal or informal
process ongoing for the disposal of its interest in TIM
Participacoes," it said in a statement late on Wednesday.
However, Spain's Telefonica, which is Telecom
Italia's biggest shareholder, is expected to back a sale of the
Brazilian unit, said the sources.
BREAK-UP SALE ?
It remains to be seen if TIM Participacoes could be sold in
its entirety to one buyer or if it would need to be broken up
and sold in parts to local rivals Telefonica, Mexico's America
Movil and Brazil's Oi.
Regulators in Brazil are not likely to allow one of the
three to buy the whole of TIM Participacoes because the
resulting operator would be too big in terms of market share but
sources familiar with the situation said Telefonica, America
Movil and Oi could make a joint bid and carve up the asset by
region within Brazil.
However, such a move would be complex and risks taking up to
a year to carry out, the sources added. Oi's involvement would
be complicated by the fact that it announced last week a merger
with Portugal Telecom and needs until mid-2014 to close
However, a price tag of $12 billion would give a 50 percent
premium to the current $8 billion market value of Telecom
Italia's stake in TIM Participacoes.
"Telecom Italia would have to launch (the sale) process and
one possible buyer group is Telefonica, America Movil and Oi,"
said one person familiar with the situation.
"Does Telefonica have a preference to split up TIM ?
Clearly yes. Will Telecom Italia decide overnight that it wants
to sell Brazil ? Clearly no."
A senior telecoms banker said that Telefonica and Carlos
Slim, the founder of America Movil, are already "actively
working" on splitting TIM Participacoes between them.
"That is the Telefonica end game - to split TIM between them
But the uncertainties around the disposal mean that credit
rating agencies remain concerned over whether it can solve
Telecom Italia's debt problem.
Carlos Winzer, the Moody's analyst who downgraded Telecom
Italia on Tuesday, said the sale could take a year to close.
"We are concerned that the options Patuano has to strengthen
the balance sheet, which include asset sales, could take a long
time to carry out and also face high execution risk," said
Winzer in an interview.
Telefonica's Vivo brand is the leading mobile carrier in
Brazil with a 28.7 percent market share. Tim Participacoes holds
a 27.2 percent share, while America Movil's Claro has 25 percent
and Oi 18.6 percent, according to the telecom regulator's data.
Telecom Italia shares closed up 6.2 percent at 0.66 euros on
Wednesday while shares in TIM Participacoes were up 6.4 percent
at 11.60 Brazilian reals by 17:35 GMT after hitting a record
high of 11.99. Oi shares were up 1.3 percent.
Spokesmen for Telefonica and America Movil declined to
comment. Telecom Italia could not immediately be reached for