Telecom Italia SpA has sold its 27% stake in Cuba’s Etecsa to Cuban state finance arm Rafin SA for $706 million. 1 News media reported January 31 that the Italian telecom giant had already received $500 million from Rafin, with the balance to be paid in monthly installments of $5.72 million each over the next 36 months. The arrangement is subject to “specific credit guarantees,” TI said without elaborating.

"The sale concludes TI’s efforts to shed non-core assets and reduce debt," CEO Franco Bernabe said; the company will now expand its Argentina and Brazil operations. In its latest half-year report, TI valued its Etecsa stake at 367 million ($481 million). However, TI reportedly asked $780 million for the stake in negotiations with Spain’s Telefónica in 2009.

According to Bloomberg, the Castro regime set up Rafin in 1997 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 SA (Gaesa), the armed forces’ business unit that controls entities which 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. Britain’s Cable & Wireless Communications PLC said it wanted to bid for the 27% stake, attracted by Cuba’s growth potential in the mobile phone sector. C&W is entering the Cuban market via an undersea cable linking Jamaica and Cuba.

“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 told the Sunday Times in 2010.

Six Cuban state entities now own Etecsa: Telefónica Antillana SA (51%); Rafin SA (27%), Banco Financiero Internacional (6.16%); Universal Trade & Management Corp. SA (11.09%); Banco Internacional de Comercio SA (0.92%) and Negocios en Telecomunicaciones SA (3.83%).