BUENOS AIRES (Reuters) - Argentina's antitrust regulator will study a proposal by Spanish-owned Telefonica (TEF.MC) to gain control of Telecom Italia (TLIT.MI), both of which operate in the South American country, the government said on Tuesday.
Telefonica agreed on Tuesday to a deal worth around 860 million euros ($1.2 billion) to increase its stake in Telco, the controlling shareholder in Telecom Italia which it currently co-owns with some Italian investors.
Telefonica controls one of Argentina's leading telephone operators, Telefonica de Argentina, while Telecom Italia indirectly controls Telecom Argentina TEC2.BA (TEO.N), another top operator.
Under a complex series of transactions, Telefonica will only gain full control of Telco - and therefore Telecom Italia - following approval by antitrust regulators.
That makes approval from Argentina's antitrust regulator key.
The government said in a statement it has asked the CNDC antitrust watchdog agency "to establish whether this shareholder modification violates the commitments both companies took on before the state in October 2010."
"Any changes must be pro-competition and be expressly approved by the Argentine government," it added.
Following a two-year probe, the Argentine government dropped an antitrust investigation of Telecom Italia and Telefonica in October 2010 after the government and telecommunication companies reached an agreement.
At the time, Argentina's antitrust commission said it could reopen its investigation if the agreement, which sought to limit Telefonica's influence over Telecom Argentina, was broken.
A source at the CNDC had told Reuters earlier on Tuesday that they were looking into the situation to "ensure competitiveness in the Argentine marketplace."
Reporting by Karina Grazina; Writing by Anthony Esposito; Editing by Carol Bishopric