Spanish stake in Italian telecoms firm raised

TELECOM Italia’s Italian shareholders have struck a deal with Telefonica that will see the Spanish operator gradually increase its stake in Italy’s largest telecoms provider through their shareholder pact.

The deal, which follows months of wrangling by Italy’s Mediobanca, Generali and Intesa Sanpaolo, will allow the Italian financial investors gradually to exit Telco, the holding company that controls about 22% of Telecom Italia, while Telefónica increases its holdings.

The agreement defines the available windows to exit Telco — the first in June 2014, the second in February 2015 — and reduces capital risks deriving from the potential future disposal to Telefónica, Generali, the largest shareholder after Telefónica, said.

In a multifaceted deal, Telefónica will initially own 66% of Telco but without voting rights, Generali will own 19.3% and Mediobanca and Intesa Sanpaolo will each own 7.3%. Starting next year, Telefónica will increase its stake in Telco to 70%, making it by far the largest single shareholder in the Italian group, which is struggling under net debt of close to €30bn in difficult operating conditions. The deal also lays out two windows — in June 2014 and again in February 2015 — when the Italian shareholders in Telco can withdraw from Telco, providing Telefonica with the basis for a creeping takeover of the firm.

Telco’s Italian shareholders have been battling to exit the holding company for months after taking a hit to their balance sheets from their exposure to Telecom Italia’s falling share price.

They bought into Telco at about €2.80 per share and have already written down the value of their stakes to €1.20. But Telecom Italia is now trading at €0.60 per share. Worsening their pain, the banks were also exposed to Telco as lenders. The deal will see the Spanish operator taking on Telco debt. With Telefónica’s acquisition of part of the shareholders’ loan, Mediobanca said it halved its debt exposure through the loan to €43m in exchange for Telefónica shares. Mediobanca said as a result of the deal it had realised a gain of €60m to be booked to the accounts for the first quarter of the new financial year.

Generali said the net impairment of the Telco stake would be about €65m and the hit would be taken in the third quarter of 2013.