Spanish Telecom behemoth,
), has refused mulling over any option to buy a significant stake
Telecom Italia S.P.A
) by tying up with investment management company
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
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.
), currently holds a Zacks Rank #4 (Sell).
AMER MOVIL-ADR (AMX): Free Stock Analysis
BLACKROCK INC (BLK): Free Stock Analysis
TELEFONICA S.A. (TEF): Free Stock Analysis
TELECOM ITA-ADR (TI): Free Stock Analysis
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