Telecom Italia buyout deal done


Months of speculation over the fate of former state telecommunications monopoly Telecom Italia ended during the weekend when it was announced that the company would be sold to a group of investors led by Spain's Telefonica for €4.1 billion ($5.6 billion).

The deal eliminates other suitors for the company that included Silvio Berlusconi-controlled broadcasting giant Mediaset, AT&T and Telefonica's archrival America Movil, owned by Mexican tycoon Carlos Slim.

The move also casts doubt on the future of Telecom Italia Media, which owns La 7 — the smallest of Italy's seven national television networks — and has had plans to become a leading content producer for television delivered online. The unveiling of that plan in September resulted in the resignation of then-CEO Marco Tronchetti Provera and set off a chain of events that led to the sale to the group led by Telefonica, which indicated two weeks ago that it could have limited plans for Internet TV initiatives.

The new owners of the company will be a group led by Telefonica with a cast of junior partners from Italy, including insurer Generali, banks Intesa Sanpaolo and Mediobanca, and the Benetton family, the famous clothing makers. But the deal is structured in such a way that the Italian partners own a larger stake in Telecom Italia than Telefonica has — a way to make regulatory approval in Italy more likely — but a smaller share of a new investment vehicle called Telco that will control Telecom Italia's board.

Italian Prime Minister Romano Prodi was against Telecom Italia falling into foreign hands but said he liked the structure of this deal because it included so much participation from Italian shareholders.

"It's good to see Italian financial institutions showing a willingness to make a commitment," Prodi said in a television interview aired Sunday by state broadcaster RAI.

Even though Mediaset lost its chance to acquire control of Telecom Italia, the three-network broadcaster might still end up helping to pay for the deal. Telefonica said it will help pay for the Telecom Italia acquisition through the sale of its 75% stake in Dutch reality television producer Endemol for as much as €3 billion ($4.1 billion), something that could speed up the sale of the company. Mediaset is one of the leading candidates to win the bidding for Endemol.