Telefonica Naysays TI Talk - Analyst Blog

By
A A A

Spanish Telecom behemoth, Telefonica ( TEF ), has refused mulling over any option to buy a significant stake in Telecom Italia S.P.A ( TI ) by tying up with investment management company BlackRock Inc . ( BLK ).

The concerns started mounting after BlackRock recently raised its stake in TI to 9.9% making it the second largest stake holder in the Italian telecom giant. However, responding to queries raised by the Italian stock market regulator, Telefonica declared that it is not increasing its stake further. Notably, TI has struggled in recent years due to lower investments and a massive debt obligation.

TI is controlled by Telco, which owns a 22.4% stake in the Italian carrier. Telco in turn is owned by Intesa San Paolo SpA, Assicurazioni GeneraliSpA, Mediobanca and Telefonica. Earlier in 2013, Telefonica raised its stake in Telco by acquiring shares from other investors and has the option to buy a controlling interest in 2014.

Telefonica, which operates under the Vivo brand in Brazil, had 76.614 million subscribers at the end of Sep 2013. However, Telefonica could face anti-trust concerns in Brazil if it raises its stake further in TI as the carriers remain competitors in the largest Latin American country.

Further, the Spanish incumbent has one of the highest debt burdens within the industry. The company has taken several initiatives including divestment of non-core assets to reduce its mounting debt. Telefonica is also slated to close its U.S.-based VoIP (Voice over Internet Protocol) subsidiary Jajah by the end of Jan 2014.

Owning a majority of TI will allow Telefonica to get hold of a large pie of the Brazilian market share, but will put more pressure on its ailing balance sheet. We thus believe that Telefonica's decision to raise stake is a wise one.

Telefonica Brasil, which operates with other Latin American telecom service providers like America Movil S.A.B. de C.V. ( AMX ), currently holds a Zacks Rank #4 (Sell).



AMER MOVIL-ADR (AMX): Free Stock Analysis Report

BLACKROCK INC (BLK): Free Stock Analysis Report

TELEFONICA S.A. (TEF): Free Stock Analysis Report

TELECOM ITA-ADR (TI): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AMX , BLK , TEF , TI

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

100%
60%
83%
50%

Most Active by Volume

57,375,820
  • $16.20 ▼ 0.80%
46,357,695
  • $102.13 ▲ 1.23%
39,856,106
  • $3.59 ▲ 0.84%
36,749,915
  • $19.21 ▲ 5.38%
35,094,671
  • $74.63 ▼ 1.75%
25,538,058
  • $48.06 ▼ 0.23%
24,241,250
  • $38.18 ▲ 1.03%
22,422,839
  • $11.20 ▲ 3.70%
As of 8/27/2014, 04:02 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com