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Telefonica denies TIM acquisition/breakup report

  • Telefonica (TEF +0.2%) denies an Italian media report stating the carrier and Brazilian subsidiary Vivo (VIV -0.7%) are working with rivals America Movil (AMX +0.4%) and Oi (OIBR -1.7%) to acquire and break up Telecom Italia's (TI +0.1%) Brazilian unit, TIM Participacoes (TSU -1%). TIM and Oi are trading moderately lower today after flying higher on Friday in response to the report.
  • Telefonica adds it hasn't talked with Brazil's antitrust regulator Cade about a deal. Reuters recently reported Cade has given Telefonica, which owns a large indirect stake in Telecom Italia, 18 months to lower its Brazilian market presence, either by cutting ties with TIM or finding a partner for Vivo.
  • However, Cade reportedly prefers TIM to be sold in whole to a new market participant, rather than piecemeal to rivals. Telefonica, America Movil, and Oi would likely prefer that didn't happen, since it could spell competition from a major foreign carrier such as AT&T or Vodafone.
  • Telefonica and others have been pressuring Telecom Italia to explore a sale of TIM, but the debt-laden Italian telco has been reluctant to cut its ties with a major growth market.
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