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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

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 euro2.82 (US$3.83) _ high above their present market level _ 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.
But union leaders persisted with concerns about Telecom Italia's becoming "Spanish."
"There's the impression that the Italian-ness of Telecom has been safeguarded when in fact the brains of the operation risk being moved to Spain," the secretary-general of the General Labor Union Renata Polverini said, citing concerns about the future of Telecom Italia's 83,000 workers.
Despite weekend statements by one of the chairman of Generali Assicurzioni _ one of the key members of the new shareholder's group _ that Italy's finance minister had contacted him about preserving the Italian nature of the former monopoly, Italy's premier, Romano Prodi, said his government has shown "propriety" and "discretion."
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.
"We take a positive view on the likely increased board stability the new ownership structure will bring and note that a closer operational relationship with Telefonica could provide significant benefits," Stuart Reid, director in Fitch's European TMT group, said in a statement.
While shares of Telecom Italia were boosted in early trading Monday under expectations that the deal ushered in a period of stability at Telecom Italia, they closed down 2.2 percent at euro2.22 (US$3.02).
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, resigned. He soon after started shopping for a buyer for the Pirelli tire company's 80-percent Olimpia stake. Under the deal announced Saturday, the apparel-making 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 Benetton'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. In Spain, Telefonica said that it would have a veto on new members.
Former Premier Silvio Berlusconi has said his Mediaset SpA media empire would be interested.


Updated : 2021-04-22 12:12 GMT+08:00