ROME Telecom Italia (TLIT.MI) is looking at a bid for Vivendi's (VIV.PA) Brazilian telecoms company GVT, its chief executive said on Tuesday, one day after a foreign investor proposed injecting fresh cash into Italy's largest telecoms operator.
Egyptian tycoon Naguib Sawiris, who sold Italy's third- biggest mobile operator Wind last year, wants to re-enter the country by investing in the debt-laden incumbent operator via a capital increase.
Telecom Italia said on Monday that it would consider Sawiris proposal and had presented some details to its board, but neither side disclosed the size and the objectives of the potential investment.
Press reports in Italy have indicated a figure of up to 4 billion euros ($5 billion) and said the move could help Telecom Italia fund a purchase of GVT.
Sources have told Reuters that Vivendi is seeking at least 7 billion euros for GVT, and that Telecom Italia is one of four companies that have obtained documents on the Brazilian telecoms company. The deadline for preliminary, non-binding bids is around the end of the year, the people said.
"GVT is a fixed-line operator and in Brazil we already have the second-biggest mobile operator there, so it is certainly something to look at, just as we are looking at many other things," CEO Marco Patuano told reporters in Rome.
Asked whether the company was considering a capital increase along the lines of what Sawiris proposed, Patuano replied: "At the moment, there is no need for one."
He declined to comment further on Sawiris's interest in the company.
The company has also been evaluating a possible spin-off of its valuable fixed-line network in Italy, and has been in talks with the state-backed investment fund Cassa Depositi e Prestiti (CDP) over the project.
Telecom Italia is controlled by an unlisted holding company, Telco, which owns 22.4 percent of the shares. Spanish telecom group Telefonica (TEF.MC) and Assicurazioni Generali (GASI.MI), Mediobanca (MDBI.MI) and Intesa Sanpaolo (ISP.MI) of Italy are all shareholders of Telco.
The Italian comeback of Sawiris was met with cold reception by some of the shareholders on Telecom Italia's board, a source told Reuters on Monday.
By entailing a capital increase, Sawiris's offer could prove unappealing to some existing investors as they could see their stakes in Telecom Italia diluted.
A stronger presence of Telecom Italia in South America via a GVT acquisition could also clash with Telefonica's presence in the continent. The two compete in mobile operations in Brazil.
Analysts at Espirito Santo said the limited information on Sawiris' proposed capital increase meant it was hard to predict how Telecom Italia's main shareholders would react.
"At this stage there are more questions than answers, such as the size of the stake Mr. Sawiris is aiming for, the amount involved and the destination of any proceeds, and this is not to mention any implications for the controlling vehicle Telco," they wrote on Tuesday.
"It remains to be seen if such an operation would be reserved for Mr. Sawiris, resulting in the dilution of the remaining shareholders, or if the capital increase would involve all of TI's shareholders, namely Telco and its own shareholders."
Telefonica has declined to comment on Sawiris' interest in Telecom Italia, as have the Italian banks.
At 1622 GMT, shares in Telecom Italia were down 0.28 percent at 0.72 euros, underperforming a 1.4 percent gain in Milan's blue chip index. ($1 = 0.7867 euros)
(Writing by Danilo Masoni, additional reporting by Leila Abboud in Paris, editing by Jennifer Clark and Louise Heavens)