BlackRock Says Followed Rules With Telecom Italia Stake

BlackRock Inc. (BLK) said it complied with Italian disclosure requirements after a regulator said the world’s largest money manager may have broken rules by failing to report an increase of its stake in Telecom Italia SpA. (TIT)

The investment company’s holding in Telecom Italia was 7.78 percent as of yesterday, it said today. A filing dated Dec. 9 to the U.S. Securities Exchange Commission showed BlackRock owns a stake of 10.14 percent. The New York-based firm said the discrepancy was due to some bonds that can be converted into Telecom Italia shares.

While Italy requires reporting of holdings exceeding a 10 percent threshold, BlackRock said the debt isn’t relevant to its disclosure obligations in the country because the shares into which the bonds will be converted haven’t yet been issued. BlackRock, Telefonica (TEF) SA and Och-Ziff Capital Management Group LLC were given preference to take part in a 1.3 billion-euro ($1.8 billion) mandatory convertible bond sale last month by Italy’s biggest carrier.

The 7.8 percent stake makes BlackRock Telecom Italia’s second-biggest investor, behind an investment entity controlled by Spain’s Telefonica. Telecom Italia shareholders will meet on Dec. 20 to vote on the issuance of new stock for the convertible bond, as well as on a motion by minority investor Marco Fossati to remove the current board, which he says is too influenced by Telefonica and its partners.

Telecom Italia rose 5.1 percent to close at 69.6 cents in Milan today. The stock is up 1.9 percent this year, valuing the company at 12.7 billion euros.
Shareholder Meeting

In its statement, BlackRock said it has registered 796.7 million Telecom Italia shares for the shareholder meeting, equal to about 5.94 percent.

Giuseppe Vegas, chairman of Italian market regulator Consob, said in an Il Sole 24 Ore interview published yesterday that BlackRock should have informed the watchdog and will investigate whether BlackRock acted alone or on behalf of another party. A Consob official declined to comment today.

In a separate statement, Telecom Italia said “it has received no communication” on the stake increase from BlackRock.

Last year, BlackRock’s statements were reviewed by Consob after the money manager said it made an erroneous filing stating that it had reduced its holding in UniCredit SpA to 1.7 percent.

BlackRock also owns a 3.9 percent stake in Telefonica, according to data compiled by Bloomberg.
Telefonica Stake

This week’s Telecom Italia shareholder meeting will be one step in a battle over control of a phone company that’s seeking to reduce debt and revive its business. Fossati’s Findim Group SA, which owns about 5 percent of Telecom Italia, has said Telefonica and its partners in the Telco Spa vehicle have too much influence over the carrier.

While Telefonica has held a stake in Telco since 2007, giving it influence over Telecom Italia, it has increased its clout this year. In September, Telefonica bought additional shares of Telco, which owns 22.4 percent of Telecom Italia.

Last week, Telefonica Chief Executive Officer Cesar Alierta and Julio Linares, a former chief operating officer, stepped down from Telecom Italia’s board to avoid perceived conflicts of interest in Brazil, where the two carriers compete.

Board candidates proposed by Findim, which owns about 5 percent of Telecom Italia, are Alessandro Castellano, Girolamo Di Genova, Vito Alfonso Gamberale, Franco Lombardi and Daniela Mainini.

Telecom Italia CEO Marco Patuano is pushing to trim the company’s debt, which is rated junk by Moody’s Investors Service and Standard & Poor’s. In November, Patuano unveiled plans to dispose assets including wireless towers and a broadcasting unit and to issue a convertible bond. The company also agreed to sell its Argentine business for $960 million.