AT&T became the latest company to pull out of talks for a big stake in Telecom Italia as the negotiations came to nothing over regulatory insecurity. AT&T on Monday abandoned its offer to acquire a stake in the company that controls Telecom Italia, the largest Italian telecommunications company, for around two billion euros or $2.7 billion. AT&T and Mexico’s America Movil were holding exclusive negotiations with Pirelli to buy a controlling stake in Olimpia, which possess 18 percent of Telecom Italia, earlier this month and the conditions of exclusivity expired on April 30. Pirelli was involved in negotiations with the companies over selling a third of its Olimpia stake to each and having an option to sell the rest in a year.
In a brief official communique, AT&T had not mentioned any specific reason for the decision to withdraw its offer. However, according to reports, AT&T had been discouraged by the acute political pressure in Italy against a sale to a foreign company. In fact, Telecom Italia was involved in takeover talks with numerous potential buyers in the last six months, but the only decisive offer came earlier this month from AT&T and America Movil, which announced their offer to Olimpia at the same time although they were officially acting independently. AT&T has possession of 9 percent stake of America Movil.
The revelation that the two foreign companies were in talks to acquire controlling stake in Telecom Italia invited a series of intense opposition in Italy by politicians. They argued that the firm had strategic importance to the country and should not be sold to a foreign company. Even though Prime Minister Romano Prodi had categorically stated that he would not step in to impede the sale, but at the same time he and many of his ministers had indicated that an ‘Italian solution’ could be found.
On the other hand, AT&T’s effort to buy stakes in Olimpia had strategic importance for it as it could have facilitated a relatively fairly small investment, a firm footing in Italy’s corporate market and an extended presence in Germany, France and the Netherlands, where Telecom Italia has been building broadband Internet businesses. AT&T is already involved in selling telecommunications services to some of Europe’s largest companies and offers services in Europe for American-based companies.
In the meanwhile, America Movil has said that now they are considering their options after partner AT&T pulled out of talks to buy a stake in Olimpia. The Mexican telecom company said that they could try to find other associates, go it alone or pull out of the talks with Pirelli to acquire a controlling stake in Olimpia. On the other hand, Intesa Sanpaolo, a leading Italian bank, has expressed its intention to buy a stake in Olimpia.
However, the breakdown of the talks may make the way for a continuation of dialogues with Telefonica of Spain, which has attempted earlier to structure a deal with Pirelli. According to reports, France Telecom is also weighing its options to bid for a stake in Olimpia.
