* Telefonica bid for GVT may force Telecom Italia to react
* T.Italia CEO says won't make "crazy" acquisitions in
* Possible deal with GVT, sale of TIM Brasil remain options
* Shareholder Fossati calls for GVT/TIM Brasil merger
(add shareholder calling for GVT/TIM merger, shares)
By Danilo Masoni and Stefano Rebaudo
MILAN, Aug 6 Italy's biggest phone company
Telecom Italia said on Wednesday it was considering
all its options in Brazil, including the possibility of an
acquisition that would rival its top investor Telefonica
On Tuesday, Spain's Telefonica made a surprise 6.7 billion
euro ($9 billion) bid for Vivendi's Brazilian broadband
unit GVT. The Italian firm, meanwhile, has not
ruled out the possibility of merging GVT with its own TIM Brasil
to bolster its broadband base.
Brazil accounts for about one-third of Telecom Italia's
revenues. In spite of a recent economic slowdown, the market in
the Latin American country continues to be its main engine for
growth as Italy struggles to emerge from a long recession.
Weighed down by a heavy debt pile and the need to make
costly network upgrades, Telecom Italia has refrained from
making the first move in the consolidating Brazilian market, but
Telefonica's offer for GVT could force it to react.
Telecom Italia Chief Executive Marco Patuano said he was
open to all options for its Brazilian unit, including a tie-up
with GVT, but cautioned that the heavily indebted company would
not make what he termed as a "crazy" acquisition there.
"We keep all options open, but we are not interested in
anything that could be irrational," Patuano, who is carrying out
a strategic review of asset sales and innovative investments,
told analysts during a conference call on Wednesday.
Shares in Telecom Italia closed down 2.6 percent at 0.8035
euros in a lower Italian market on Thursday.
Shareholder Marco Fossati, Telecom Italia's second-biggest
shareholders with a 5 percent stake, said on Wednesday Telecom
Italia should merge TIM Brasil with GVT and forge an alliance
"Such a plan would be more beneficial in the medium and long
term for Vivendi than a sale that would see it cut out from a
high-potential market such as Brazil," Fossati said.
If the Italian group decides to launch a counter bid for
GVT, that would force it to seek a capital increase.
A tie-up between TIM Brasil and GVT would heighten Telecom
Italia's rivalry with Telefonica in Brazil by creating a
stronger competitor to Telefonica's local unit Vivo.
On the other hand, if Telefonica's bid succeeds, TIM Brasil
would lose a major strategic option, and its position would be
weakened because it would remain the only mobile operator in
Brazil without a large broadband business.
It remains to be seen whether mobile consolidation would
still occur in Brazil. Telefonica has been seeking to engineer a
joint bid for TIM Brasil with America Movil and Grupo
Oi to cope with a regulatory ruling.
Patuano said TIM Brasil was a strategic asset for the group,
but he would consider selling it if Telecom Italia received an
offer at a high price.
Telefonica has a 14.8 percent stake in Telecom Italia but
has recently taken steps to reduce that holding under pressure
from Brazilian antitrust authorities, because it controls Vivo,
the No. 1 mobile operator in the Latin American country, as well
as holding a significant indirect stake in rival TIM Brasil.
As part of its offer for GVT, Telefonica has given Vivendi
the option to take 8.3 percent of Telecom Italia, paving the way
for an exit from the Italian group after seven years.
Vivendi said none of its units were for sale but it would
consider Telefonica's offer at a board meeting in late August.
Telecom Italia's comments on Brazil accompanied a broadly
in-line set of first-half results.
Core profit fell 7.6 percent to 4.3 billion euros ($5.8
billion), as a weak economy in its domestic market and the
slowdown in Brazil weighed on sales.
The company said price competition in the Italian mobile
business had eased and confirmed expectations of a gradual
recovery of its operating performance in Italy in 2014.
(1 US dollar = 0.7480 euro)
(Additional reporting by Lisa Jucca, editing by Jason Neely,
Jane Baird and David Evans)