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Telecom Italia deal ends long battle for control of former state monopoly

Telecom Italia deal ends long battle for control of former state monopoly

MILAN, Italy _ The euro4.1 billion (US$5.58 billion) deal giving Spain's Telefonica SA and a group of Italian financial backers control of Telecom Italia was welcomed Monday as the kind of cross-border deal that could shape the future of the telecommunications landscape.
A consortium of Telefonica and Italian financial heavyweights reached a deal late Saturday to buy out Telecom Italia SpA's largest shareholder, ending a long battle for control of Europe's fifth-largest telecom operator.
Under the deal, which valued the Olimpia holding company's Telecom Italia shares at euro2.82 (US$3.83), the Italian members of the consortium hold a majority 57.7 stake with 13 seats on the board, while Telefonica controls 42.3 percent of the company with two seats.
Madrid-based Telefonica said it will invest euro2.3 billion (US$3.1 billion) in the new company and that the new entity will carry out a euro900 million (US$1.2 million) capital increase.
The arrangement appeared to satisfy politicians in Rome, who had expressed concern that the nation's dominant telecommunications network would fall under foreign control. Earlier talks to sell the Olimpia stake to U.S-based AT&T and Mexican company America Movil SA had withered under Rome's disapproval.
Italy's premier, Romano Prodi, said his government has shown "propriety" and "discretion," and didn't interfere with the events involving Telecom Italia, according to Italian media reports.
In Brussels, the deal was welcomed by officials fighting to loosen the grip of incumbent national operators.
"The fact that two of Europe's major telecom incumbents are now teaming up in a cross-border deal is a strong signal that a pan-European telecom market has started to develop," EU Telecommunications Commissioner Viviane Reding said in a statement Sunday. Reding is due to release a full telecom reform in July that could include breaking them up.
Analysts have said Telefonica's alliance with Telecom Italia will generate euro2 billion (US$2.7 billion) in synergies, especially in Brazil, where both companies have leading mobile operators.
Shares of Telecom Italia were boosted in early trading Monday under expectations that the deal ushered in a period of stability at Telecom Italia, before dropping 0.5 percent to euro2.26 (US$3.08) by early afternoon.
Telecom Italia has been buffeted by crisis since former Chairman Marco Tronchetti Provera ran afoul of the government last summer with plans to spin off the mobile phone and fixed line networks.
Tronchetti Provera, who took control of Telecom Italia in 2001, was forced to resign. He soon after started shopping for a buyer for the Pirelli tire company's 80-percent Olimpia stake. Under the deal announced Saturday, the Benetton family also sold its 20 percent share in Olimpia, but then bought back into the new shareholders group.
The Italian members of the new controlling shareholder group are the insurer Generali with 28.1 percent, the Milan merchant bank Mediobanca and Italy's largest retail bank Banca Intesa Sanpaolo with 10.6 percent a piece and the apparel making Benetton family's holding company Sintonia with 8.4 percent.
Intesa Sanpaolo has the possibility of taking on new Italian investors, which may join the new shareholders group, called Telco SpA, with stakes of between 2 percent and 5 percent.
Former Premier Silvio Berlusconi has said his Mediaset SpA media empire would be interested.


Updated : 2021-07-29 21:07 GMT+08:00