Brazil unlikely to decide on TIM in the short run, minister says

Reuters

BRASILIA/SAO PAULO, Dec 18 (Reuters) - Brazil's government will only decide on the fate of wireless carrier TIM Participações SA after its parent company's shareholders resolve a dispute over the participation of rival Telefonica SA in its capital, Communications Minister Paulo Bernardo said late on Tuesday.

Shareholders of Telecom Italia SpA, which controls TIM Participações, may decide on Friday to oust Telecom Italia's board. The shareholder vote is crucial for the future strategy of Telecom Italia and its position in Brazil, where it is a direct competitor to Telefonica.

This month, Brazilian antitrust watchdog Cade ruled that Telefonica had to exit its indirect stake in TIM Participações or seek a new partner for its Vivo mobile phone unit. Bernardo, speaking to reporters in Brasilia, said no decision on the Telefonica-TIM Participações situation would occur before Telecom Italia's situation is resolved.

"The truth is, we won't decide anything until the matter is discussed and decided in Italy," Bernardo said.

The minister's remarks are a signal that Brazil's government will wait to decide on the implications of a deal that could lead TIM Participações to be split or sold to a rival, triggering a massive rearrangement of the nation's telecommunications market.

When asked about the possibility of a split of TIM Participações, Bernardo stopped short of ruling it out. Yet he warned that potential conflicts of interest might prevent Telefonica from participating in an eventual decision to break TIM out in separate parts.

"First we need to know how it would be done," he said. "But if Telefonica is not allowed to make any decisions on TIM, how would (Telefonica) be allowed to discuss a potential split?"

Sources told Reuters recently that Telefonica could pressure Telecom Italia to sell TIM Participações any time after mid-2014 to both recoup part of its money-losing investment in the Italian company and ease competition in Brazil.

Some analysts have said the Cade ruling may force Telefonica to speed up the sale of its stake in Telecom Italia. That would create a headache for the company, which is already busy dealing with antitrust reviews following deals in Ireland and Germany, or even derail it.

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