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Telecom Italia said on Monday it was considering the sale of its Brazilian mobile business as the company’s deputy chairman quit his other role as chief executive of Pirelli, TI’s largest shareholder.

The move by Carlo Buora is a further step by Pirelli, the Italian tyre and real estate group, to distance itself from the country’s dominant telecoms operator.

Mr Buora became vice-chairman of TI in September following the sudden resignation of Marco Tronchetti Provera as chairman. Mr Tronchetti is still chairman of Pirelli.

Upheaval started at TI in September when it announced a strategic change of direction to concentrate on broadband and media services.

The revamp, which would have made it easier to sell large assets, led it into a dispute with the government of prime minister Romano Prodi. It has since backtracked on some of its plans, in particular the separation of its Italian mobile business.

But it indicated on Monday that it would most likely dispose of its large business in Brazil, which analysts and financiers had thought would be the most likely part to be sold.

TI said it had received a “recent, unsolicited acquisition proposal” for its Brazil business and that the board had mandated management to negotiate the possible sale.

The company did not say what the Brazil business would be worth or which group had made the offer. However, in one of the more bizarre moments in the recent turmoil, Mr Prodi’s office in September disclosed that Mr Tronchetti had told the prime minister he believed TI could raise between €7bn ($8.9bn) and €9bn by selling in Brazil.

TI said on Monday that revenues at the mobile business in Brazil were €2.8bn in the first nine months compared with €2bn in the same period last year.

Consolidated net profit in the first nine months was €2.4bn, down almost 10 per cent on 2005.

Mr Tronchetti, as chairman of Pirelli, launched a bold takeover of TI in 2001. Since then the two companies have been linked in a complicated chain of control and cross-shareholdings.

Pirelli is still TI’s dominant shareholder. It owns 80 per cent of Olimpia, a financial vehicle which in turn owns 18 per cent of TI.

Pirelli is expected on Tuesday to book a €2bn write-down in the value of its TI investment, in belated acknowledgement that it overpaid substantially in the original 2001 deal.

The write-down will be discussed by the board today, as will the issue of Mr Buora’s replacement.

Pirelli will not be rebooking the value of its TI shares at market value, because it argues that its holding is worth a “control premium” - the extra that any outside acquirer would have to pay for control of the company.

Copyright The Financial Times Limited 2017. All rights reserved.
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