TIM sells majority of Greek arm in operations restructuring move

MILAN – Telecom Italia announced a rebalancing of its businesses yesterday, selling a Greek mobile phone operator and buying Internet assets from one of its subsidiaries. Telecom Italia’s mobile arm TIM agreed to sell 81 percent of TIM Hellas, the third-biggest mobile company in Greece, for 1.1 billion euros ($1.43 billion) to private equity firms Apax Partners and Texas Pacific Group. Outside Italy, TIM is concentrating mostly on Latin America, in particular Brazil, and on Turkey. Management says its focus is on operators that are either number one or two in their respective markets. Telecom Italia also said it was buying Internet service provider Tin. it and portal Virgilio from Telecom Italia Media – already 62 percent-owned by the telecoms operator – for 950 million euros. The deal will bring under one roof the former monopoly’s fast-growing broadband business, which is focused on its Alice brand in Italy and, to a lesser extent, in France and Germany. Telecom Italia is also expected to announce soon the acquisition of the French assets of Italian ISP Tiscali in a deal worth 250 million to 300 million euros, sources familiar with the situation have said. Analysts said the two deals confirmed yesterday could be overshadowed by bigger international acquisitions. «They are probably keeping their powder dry for Brazil and Turkey,» said Hannes Wittig of Dresdner Kleinwort Wasserstein. Telecom Italia Chairman Marco Tronchetti Provera has said he wants to buy out partners in Brasil Telecom, a fixed and mobile phone operator, with whom the Italian group is involved in a drawn-out legal dispute over control. Telecom Italia is also among the bidders for the privatization of Turk Telekom, already a partner of the Italian group in a Turkish mobile phone venture. Telecom Italia is due to give analysts and investors a strategy update on Friday when it holds a presentation on the soon-to-be completed merger of the group with TIM. The Internet deal will provide Telecom Italia Media with 550 million euros to pay an expected extraordinary dividend in 2006, a further 148 million euros to buy back shares and 250 million euros to invest in its remaining television business. TIM said it would make a capital gain of 432 million euros from the TIM Hellas deal, which is expected to close in July. The agreement gives TIM Hellas an enterprise value of about 1.6 billion euros, equivalent to 16.43 euros per share. Apax and Texas Pacific said they would buy the rest of TIM Hellas at that price once the deal with TIM is closed. In March, industry sources had said Telecom Italia was in talks with the two private equity firms about TIM Hellas. TIM Hellas had 2.3 million clients at the end of 2004 and made a net profit of 78.8 million euros for last year, down 14 percent from 2003 as competitive and regulatory pressures grew. Lehman and Merrill Lynch advised TIM on the Greek deal, and Citigroup, Deutsche Bank and J.P. Morgan advised the equity firms, which were financed by Deutsche Bank and J.P. Morgan.

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