Telefónica to be largest investor in Telecom Italia

The decision by three Italian investors in Telecom Italia to exit a shareholder pact that has existed since 2007 will see Telefónica become the single largest shareholder in the Italian operator with a direct stake of around 15 per cent, although the demerger process is expected to take several months.

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Marco Patuano, Telecom Italia CEO

Following an earlier announcement by Generali that it plans to exercise its demerger option from Telco SpA, Mediobanca and Intesa Sanpaolo said this week that they have exercised their rights to request the demerger of Telco, which currently holds 22.4 per cent of Telecom Italia. The Italian companies are leaving Telco now because the pact provides two opportunities for them to do so: one between June 15 to June 30 and the other in February next year.

As things stand, Telefónica owns around 66 per cent of Telco, and 46.18 per cent of the voting rights. Intesa Sanpaolo and Mediobanca each currently hold a 7.3 per cent shareholding and 11.62 per cent of the voting rights, while Generali owns around 19.3 per cent of Telco and 30.58 per cent of the voting rights.

Once the shareholder pact is dissolved, the two banks would each be left with a direct stake of about 1.6 per cent in Telecom Italia and Generali would hold around 4.3 per cent.

The move not only secures Telefónica's position as the largest direct shareholder, but also paves the way for new investors to enter Telecom Italia: the Italian Telco partners have signalled that they plan to exit their respective investments in the operator in order to focus on their core banking and insurance businesses.

According to Reuters, sources suggest that the Italian companies are unlikely to sell their shares to Telefónica but would dispose of them gradually on the market.

Indeed, Telefónica's move last year to increase its hold over Telco has already caused much controversy because the Spanish company competes with Telecom Italia in Brazil. Minority shareholders in Telecom Italia have expressed fears that the Spanish company would force a sale and break up of Telecom Italia's unit TIM Brasil, while Brazilian anti-trust regulator Cade wants to see Telefónica sell its direct or indirect shareholding in TIM Brasil or in its own unit, Vivo.

Telecom Italia CEO, Marco Patuano, has continued to stress that TIM Brasil is a strategic asset for the company.

For more:
- see this Reuters article
- see this Bloomberg article
- see this Financial Times article (sub. req.)

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