March 9, 2018 / 10:44 AM / a year ago

Telecom Italia would reject any move to merge Brazil unit with Oi - CEO to FT

FILE PHOTO: A Telecom Italia tower is pictured in Rome, Italy, March 22, 2016. REUTERS/Stefano Rellandini /File Photo

MILAN (Reuters) - Telecom Italia (TIM) (TLIT.MI) would repel any push by activist investor Elliott to merge its Brazilian business with rival Oi (OIBR4.SA), TIM’s Chief Executive Amos Genish told the Financial Times.

Oi, Brazil’s largest fixed-line carrier, is going through heavy debt restructuring after filing for bankruptcy protection in 2016, and Genish said any push for a tie-up would be “extremely irresponsible”.

Elliott Advisors said on Tuesday it had taken a stake in TIM and was ready to replace some members of the board and push to improve strategy, value and governance at Italy’s biggest phone group. This was widely seen as a move to try and shake up the way top shareholder Vivendi (VIV.PA) runs the company.

Analysts have speculated about a possible tie-up between TIM’s Brazilian unit, TIM Participacoes (TIMP3.SA), and Oi for years, and financial markets are now speculating that Elliott may push for this. The activist fund has yet to disclose what specific changes it wants.

Genish, who is due to meet with Elliot on Friday as part of a roadshow with investors, told the FT any merger with Oi would only benefit Oi’s owners and would put at risk TIM’s promise to resume paying dividends in 2019 and 2020.

TIM presented its strategy to 2020 on Wednesday, promising richer shareholder returns by making more processes digital, boosting broadband coverage and offering more video, music and gaming content to win over customers.

Genish said at that time he did not rule out consolidation in the Brazilian market but added it was premature to discuss any potential tie-up with Oi given its state. He added the Brazilian unit had significant growth potential on its own and no potential merger should jeopardise that.

Genish also told the FT that any attempt to force TIM to float its network, which is in the process of being split into a legally separate company fully controlled by TIM, would be premature and risked antagonising bondholders.

The comments were confirmed by TIM’s spokesman.

Reporting by Agnieszka Flak; Editing by Susan Fenton

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