Telefonica strengthens grip on Telecom Italia: source

Mon Sep 23, 2013 7:49pm EDT
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By Danilo Masoni

MILAN (Reuters) - Spanish telecoms company Telefonica (TEF.MC: Quote) has agreed to hike its stake in rival Telecom Italia (TLIT.MI: Quote), a source close to the deal said, ending months of speculation on the future of the debt-laden Italian group and opening the way to asset sales.

Under the terms of the deal, to be announced on Tuesday, Telefonica will boost its stake in Telco, the holding company that controls Telecom Italia, to an initial 65 percent with an option to bring the stake to around 70 percent, a source with direct knowledge of the situation told Reuters on Monday.

Telefonica is already Telco's biggest shareholder with a stake of 46 percent, or about 10 percent of Telecom Italia shares. It will boost its stake in the Italian group to nearly 16 percent.

Telefonica is set to acquire its additional shares from the other Telco shareholders: Italian banks Mediobanca (MDBI.MI: Quote) and Intesa Sanpaolo (ISP.MI: Quote) and insurer Generali (GASI.MI: Quote).

The deal involves a "debt and equity" component, the source said, without elaborating.

The complex deal values each Telecom Italia share at "just above" 1 euro, nearly twice the current market price of 0.6 euros a share, the source told Reuters.

The deal is likely to lead to the sale or partial sale of Telecom Italia's treasured Brazilian unit Tim Participacoes, worth $10 billion on the market, as the increased Telefonica stake will likely generate antitrust problems.

Telefonica and Telecom Italia were not immediately available to comment. The Italian shareholders declined to comment.   Continued...

Telefonica's logo is seen on top of Telefonica's tower in Barcelona January 31, 2013. REUTERS/Albert Gea