A consortium of Italian companies, led by Spain’s Telefonica, succeeded in buying a majority control in Telecom Italia on Saturday. After months of speculations, Italy’s Pirelli sold its interest in Telecom Italia, thus ensuring that the phone group remains in domestic hands.
Telefonica and partners have agreed to pay €4.1 billion for a controlling 18 per cent stake in Telecom Italia. Telefonica, the Italian banks Mediobanca and Banca Intesa Sanpaolo and the insurer Generali Assicurazioni and Sintonia will buy Olimpia from Pirelli, valuing the entire holding at €6.8 billion including debt.
The consortium will then float a new company, Telco. It would include Olimpia’s 18 per cent stake in Telecom Italia as well as Generali’s 4 per cent and Mediobanca’s 1.6 per cent. Altogether, this would account for 23.6 per cent stake in Telecom Italia, Italy’s largest telecommunications company. Telefonica will pay €2.31 billion for 42.3 per cent of Telco, giving it a 10 per cent indirect stake in Telecom Italia and 2 seats on its board. The remaining 57.7 per cent of Telco will remain in the hands of Italian investors.
To balance Spanish and Italian interests in the new company, a shareholder’s pact would be signed. This pact is apparently designed to win approval from Rome, whose efforts to keep Telecom Italia in native hands has invited strong dissent from foreign companies desirous of investing. The pact would contain provisions such as a right for Telefonica to nominate 2 members on the board (out of a total of 21) and the Italian investors’ approval a must for an appointment of the chairman.
The deal puts an end to efforts by U.S. phone giant AT&T and Mexico’s Movil to conjure up a similar deal with Pirelli. Italian Premier, Romano Prodi, would be very happy with the deal, as he had reportedly called for Italian control of the national telecom giant. The agreement would give Telefonica a foothold in Italy and strengthen its presence in Latin America. Telecom Italia’s mobile division, TIM, has 26 percent of the Brazilian mobile market.
