Telecom Italia Proposes 30 Months to Fintech for Argentina Deal

Published Date : Oct 27, 2014

David Martinez, the Mexican financier of the Martinez’s Fintech Group is offered 30 months to complete the stake in the Telecom Argentina SA by the Telecom Italia SpA (TIT). Earlier, the stake had failed to win the overall regulatory approval in a year, until now. 

Prior to acquiring 22.7 per cent Telecom Italia’s indirect stake in Telecom Argentina for around $960 million, Martinez had already received two extensions of a deadline that was nearly close to the deal. Of the two extensions, the most recent one expired yesterday. 

According to a statement, Telecom Italia said the value of the entire transaction remains unchanged. This sale is the strategic plan of CEO Marco Patuano to cut down on Telecom Italia’s $35 billion debt and restore the telecom carrier’s investment grade. CEO Patuano took over the company just a year ago and is now looking forward to do home market business with Telecom Italia’s market and on Brazil. Tim Participacoes SA is the second-largest wireless carrier in the country.

Telecom Italia has received a value of $600.6 million from Fintech. This pledge of collateral value will increase the Telecom Italia’s Milan-based liquidity without altering any of its net financial position. The collateral pledge is a condition where one has to concede to a buyer for two and half more years in order to complete one deal that has been on hold for nearly a year, said Francesco Vatalaro – Professor of Telecommunications at Tor Vergata University, Rome. According to the professor, the new terms are not useful for Telecom Italia since the price does not increase even after completion is delayed. 

Fintech has already paid an amount worth $113.7 million of the total deal price. However, by the end of October it is expected to pay $215.7 million for 17 per cent of Sofora Telecomunicaciones SA. This company is controlled by Telecom Argentina, said Telecom Italia. 

Once Fintech has gained further regulatory approval, a further stake of 51 per cent will be paid in Sofora. In case, if Fintech turns unsuccessful to pay in the duration of 30-month period, Telecom Italia is free to choose another buyer for that same 51 per cent stake. 

Furthermore, if Telecom Italia cannot complete the sale within the period of 30 months, the agreement with Fintech will be terminated and Fintech will have to pay Telecom Italia an amount worth $175 million in compensation for the loss. 

At a later point, Telecom Italia also has the choice to buy back shares from Sofora.