Minister defends Telecom Italia return to Brasil Telecom

Telecom Italia (NYSE: TI) has a clear right to regain its 38% stake in Solpart, the company that controls Brazilian telecoms holding Brasil Telecom Participacoes (NYSE: BRP), Brazil's communications minister Miro Teixeira was quoted as saying by Brazilian press. "Telecom Italia has absolute reason," Teixeira said. However, the minister confirmed that telecoms regulator Anatel will decide what happens to Telecom Italia's stake, and that his opinion does not carry any legal weight. Bickering between Brasil Telecom's historic controlling shareholders Telecom Italia and Brazil's investment fund Opportunity continued this week as both companies published statements defending their respective positions. Telecom Italia argues that the contract it signed in September 2002, which details the transaction which reduced its stake to 19% from 38%, clearly stipulated Telecom Italia's right to regain the 38% stake in 2004, when Brasil Telecom was expected to meet build-out goals. Opportunity claims Telecom Italia cannot recoup its stake because there would be a conflict of interest between its own mobile operations and those which Brasil Telecom plans to launch by year-end. When Telecom Italia relinquished part of its stake, it did not expect Brasil Telecom to buy mobile licenses, complicating its return to the block which controls Brasil Telecom. If Anatel allows Telecom Italia to regain its stake, regulations clearly say that Brasil Telecom will not be able to launch mobile services, Bear Stearns wireless analyst Alexandre Constantini told BNamericas. According to local rules a company cannot simultaneously own more than 20% of two mobile operators that compete within the same geographical region. Anatel is expected to announce a decision on whether or not Telecom Italia can regain its original 38% stake next month, once it has confirmed whether Brasil Telecom met infrastructure build-out goals.