France Telecom, Telefonica to bid on Telecom Italia?

A few days ago, AT&T and America Movil announced their plan to acquire a majority stake in the holding company that owns 18 percent of Telecom Italia, and now France Telecom and Telefonica are reported to be making a similar bid. Such a deal would make AT&T and America Movil the two single largest shareholders in Telecom Italia, ditto for France Telecom and Telefonica if their plan is similar. The Italian government, however, wants to see the carrier remain in an Italian company's possession, a credential none of the reported bidders can claim.

The announced negotiations with AT&T and America Movil preclude any formal talks with other suitors until a month has passed, but the rumored European bidders may prove a more formidable and pleasing suitor to the holding company, since they are also rumored to be in talks with Italian banks and insurance companies to bring some Italian credibility to their offer.

Ovum analysts Jan Dawson, Mike Cansfield and Stefano Nicoletti issued a statement regarding the AT&T-America Movil plan: "Ownership and control of TI is a political football in Italy and some politicians have already expressed their dislike for a 'non-Italian' solution. The intertwining of business and politics is not a great omen for success... but [AT&T and America Movil] should pay a price premium that maybe they are not ready to pay today. Over the past year the company has been in turmoil with strategic u-turns and resignations, so doubts exist on whether it can take advantage of this opportunity."

The importance of Telecom Italia to the wireless industry should not be understated. During an interview at the recent CTIA show in Orlando, GSM Association chairman Craig Ehrlich told FierceWireless that only NTT DoCoMo and Telecom Italia have serious research and development departments. The rest of the world's carriers mostly rely on vendors to set the pace of technological advancements.

For more on the bidding for Telecom Italia:
- see this report from the WSJ (sub. req.)

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