Telecom Argentina/Telecom Italia/Telefonica: Confused? You will be…

7 Sep 2007

Argentine investment group Grupo Werthein, the second largest shareholder in fixed line incumbent Telecom Argentina, would consider acquiring Telecom Italia’s (TI) stake in Telecom Argentina reports BNamericas, quoting local daily Infobae. However, another paper, El Cronista, has quoted a TI source as saying the firm is not considering a sale. Telecom Argentina is controlled by a company called Sofora, which has a 83% stake in Nortel Inversora, the holding company that owns 54.7% of Telecom. Sofora is 50%-owned by TI, with 48% held by Grupo Werthein and the remaining 2% by France Telecom (FT). TI has a 2009 call option for the 50% of Sofora it does not own, although analysts believe it will probably only go for the minor stake held by FT. Grupo Werthein has a call option on FT’s 2% stake in 2013, but TI has priority.

Last month, Grupo Werthein issued a statement voicing his concern that Spain’s Telefonica could influence decision making at Telecom Argentina as a result of Telefonica agreeing to indirectly acquire a 23.6% controlling stake in TI. This move led to local competition commission CNDC to begin a study of Telefonica’s potential impact on Telecom Argentina. The incumbent’s board quickly downplayed Werthein’s claims, saying the Telefonica-TI deal would not interfere in its structure. Grupo Werthein fears it will be pushed out of Telecom Argentina if TI executes its 2009 call option. Analysts believe that TI will want to increase its stake in Telecom Argentina, and will do so, unless the CDNC rules that Telefonica’s influence in TI would be excessive. One analyst, Emiliano Wachs of Grupo SBS, said ‘It is impossible to think that Telecom [Italia] will want to sell its stake [in Telecom Argentina] as the mobile business in emerging markets is growing…Telecom Italia has control of the situation, [unless] the antimonopoly commission creates obstacles to the Telefonica/TI operation.’