Egyptian telecoms magnate Naguib Sawiris increased his short position in Telecom Italia after Spanish rival Telefónica agreed to gradually take a controlling stake in Telco, the largest shareholder in the Italian company. "We don't see any value in what it will do now," Sawiris told Ahram Online.

After Telecom Italia (TIT) was shorn of its investment grade rating last week and denied press reports it was seeking to raise €9 billion (US$12 billion) from selling its Brazilian unit, chief executive and chairman Franco Bernabè tendered his resignation. Spain’s Telefónica is believed to support offloading TIM Participaçoes (TIMP3), the Brazilian unit the debt-saddled Italian company has a 67 percent stake in.

The increase in Sawiris’ investment firm Orascom Telecom, Media and Technology’s short position in the former Italian telecoms monopoly is “only a reflection of what we think of the Telecom Italia move," said Sawiris who last year unsuccessfully sought to buy a stake in Telecom Italia through a three-billion Euro capital injection. "Because I believe Telecom Italia was already a partner in [the Brazilian] company for 20-years and the company lost around 80 percent of its market capital,” Sawiris said.

Moody's downgraded Telecom Italia's ratings to junk on Bernabè's resignation and "increased uncertainty" about the company's ability to sufficiently strengthen its balance sheet sufficiently to mitigate a “declining trend in its domestic revenues and EBITDA," or earnings before interest, tax, depreciation and amortisation, Carlos Winzer, an analyst at the ratings agency covering Telecom Italia, said in a statement.

Expected lower growth rates at TIM Participaçoes could also challenge Telecom Italia's ability to meet group financial guidance, Moody's said.

Sawiris said he isn't shorting the stock on an expectation of a further credit downgrade and low chances of Telecom Italia sell TIM Participaçoes to avoid being forced to raise capital. "My bet is that Telecom Italia won't be able to resolve its credit worthiness problems. We believe that even if Brazil was sold that does not help the credit of Telecom Italia.”

According to Sawiris, even if TIM Participaçoes is sold, it has to be at nine times EBITDA, an "astronomical price, and not a price that has ever been achieved." Telecom Italia is "also coming under pressure because its debt situation is very high.”

“So with these considerations, I believe it's very difficult for them to achieve a good price,” said the Egyptian business tycoon. “The stock will go down."

Citing data from Italy’s market regulator, Reuters last week first reported Sawiris’ investment firm increased its short position in the Italian operator. Sawiris and US telecom giant AT&T (T) contacted core investors who want to sell their shares in Telecom Italia, according to a Reuters report early September based on an unnamed source "'close to the situation."

According to a report by Italian daily Il Sole 24 Ore before Telefónica agreed to take the controlling stake in Telco, Bernabè informed Italian banking groups Mediobanca, Intesa Sanpaolo and Generali he might tell Telecom Italia's 3 October board meeting that Sawiris and China Telecom were ready to make an investment in Telecom Italia - even through a minority shareholding. The Italian newspaper report was reported by European telecommunications trade publication Telecompaper Europe.