Amid a cash crunch for the Cuban government, Cuban state company Rafin S.A. bought Telecom Italia’s 27-percent share in Cuban telecom ETECSA for a premium price of $706 million.
In its latest half-year report, TI valued its ETECSA stake at 367 million euro ($481 million), according to Italian newspaper Il Sole. However, TI reportedly asked $780 million for the stake in negotiations with Spain’s Telefónica in 2009.
According to a Telecom Italia press release, the Cuban entity already paid $500 million; Rafin will pay the remainder in 36 monthly installments of $5.72 million each. The arrangement is subject to “specific credit guarantees,” TI said, without explaining.
The sale of the ETECSA stake concludes Telecom Italia’s efforts to shed non-core assets and reduce debt; the company announced in 2008 that it wanted to sell its Cuban business. Chairman Franco Bernabe told Italian reporters that the participation in ETECSA was “only financial,” contrasting with Telecom Italia’s controlling stakes in entities in Brazil and Argentina.
The Cuban government has not commented the purchase.
The government set up Rafin in 1997 as an entity to finance import-export operations, participate in debt refinancing operations, and manage centralized funds for state companies, among others. It is the non-bank financial branch of Grupo de Administración Empresarial S.A. (Gaesa), the armed forces’ business unit that controls entities that have remained solvent throughout the most recent cash crunch that began in 2008. This is likely Rafin’s largest-volume undertaking ever.
The Cuban purchase doesn’t come as a surprise, since TI officials had talked about negotiations since last October. However, third-country companies including Telefónica had also expressed interest. Earlier this year, Britain’s Cable & Wireless Communications plc said it wanted to bid for the stake, attracted by Cuba’s growth potential in the mobile phone sector. The London-based company is entering the Cuban market via an undersea cable linking Jamaica and Cuba. The cable landing, company CEO Tony Rice said last year, would position Cable & Wireless as a top contender to take over the ETECSA share.
“The starting point is the cable landing, but the greater prize is working with the [Cuban] government to develop its telecoms market,” Cable & Wireless CEO Tony Rice said in March, according to the Sunday Times.
A Cable & Wireless spokesman later said that reports about an ETECSA stake purchase went “too far,” according to trade publication Total Telecom.
Cuba is not only the largest Caribbean market, but it is also the most underdeveloped for broadband and wireless communications in the western hemisphere.
Six Cuban state entities now own ETECSA — Telefónica Antillana S.A. (51.006%), Rafin S.A. (27.003%), Banco Financiero Internacional S.A. (6.157%), Universal Trade & Management Corporation S.A. (11.086%), Banco Internacional de Comercio S.A. (0.923%), and Negocios en Telecomunicaciones S.A. (3.825%).
