Report: Telecom Italia could face takeover bid this year

Italian investors in Telecom Italia, which has been grappling with some tough decisions relating to its mobile and fixed businesses, are prepared to sell their stakes in a move that could leave Telecom Italia vulnerable to a takeover bid, according to a Reuters report.

Italian investors in holding company Telco, which controls Telecom Italia, are prepared, in varying degrees, to sell their shares by Sept. 28, the report said, citing unnamed sources.

Indeed, analysts at brokerage Bernstein told Reuters that a lowly valuation, an attractive business in Brazil and a willingness among some Telecom Italia shareholders to sell could make the company a takeover target before the year is out.

While Vodafone, Telefónica, SoftBank, AT&T and possibly even Carlos Slim have all been cited as potential bidders, Telefónica is seen as the most likely. This is because the Spanish group has the largest share in Telco, which controls 22.4 per cent of Telecom Italia, worth around €10 billion at the current market price, and would probably prefer to buy out other Telco shareholders rather than see their shares go to a rival company.

Telecom Italia shares are certainly seen as cheap compared to the operator's European peers: "Telecom Italia is the cheapest of stocks we cover, trading at just 4.0 times EBITDA (earnings before interest, tax, depreciation and amortisation), a 22 percent discount to incumbent peers," Bernstein analysts told Reuters.

Italian investors in Telco include Mediobanca, Assicurazioni Generali and Intesa Sanpaolo. Sources told Reuters that these investors have until Sept. 28 to say if they want to leave the shareholder pact.

Telefónica and the Italian shareholders declined to comment, Reuters said.

Telecom Italia is regarded as a strategic asset by the Italian government, but with debts of €28 billion and ongoing plans to hive off the fixed-line network, bids from foreign companies might seem more attractive.

The mobile unit also faces strong competition from 3 Italia and Vodafone Italy, which will become a wholly-owned subsidiary of Vodafone following the group's exit from Verizon Wireless. Efforts to combine Telecom Italia with 3 Italia came to nothing after Telecom Italia rejected the advances of Hutchison Whampoa earlier this year.

For more:
- see this Reuters article
- see this separate Reuters article

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