The prospect of an agreement between Hutchison Whampoa and Telecom Italia over a merger of their respective mobile businesses in Italy continues to diminish, according to multiple reports, as a lack of progress in the talks is starting to grate on Hong Kong-based Hutchison.
Reuters reported that, according to unnamed sources, Hutchison Whampoa is still keen to do a deal in Italy in order to boost its market position but is losing patience with the Italian operator, which has been distracted by its decision in May to spin off its fixed-line business.
Telecom Italia's board is due to meet on Thursday to discuss a possible tie-up with 3 Italia, but there is still no guarantee that any steps will be taken, sources told Reuters.
"Telecom Italia has opted for the network separation. The merger with 3 Italia has been slowed for political reasons and the Chinese's patience has a limit," one unnamed source told Reuters.
Telecom Italia directors will probably decide to halt the proposed merger at Thursday's meeting, unnamed sources told Bloomberg. Telecom Italia executives intend to focus on spinning off the company's fixed-line assets, the sources added.
The talks between Hutchison and Telecom Italia have also stalled because of disagreements over valuation, sources told Bloomberg. The report said 3 Italia has a so-called fair value of €1.5 billion ($1.95 billion), but there is a lack of clarity on how much of the operator's accumulated losses can be used to offset taxes.
The fact that Hutchison also wants to become the biggest shareholder in Telecom Italia following a merger of their mobile assets is a further sticking point for shareholders.
"Not all shareholders in Telco are convinced they should sell," sources told Reuters, referring to the Telco vehicle that controls Telecom Italia and whose biggest shareholder is Spain's Telefónica.
Hutchison at least had some success in Ireland last week, when it agreed to acquire Telefónica's O2 Ireland unit for €850 million.
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