Egypt’s Sawiris considering Telecom Italia investment

Egyptian telecoms tycoon Naguib Sawiris has reportedly offered to spend as much as €5 billion ($6.4 billion) on a stake in Telecom Italia, Italy’s debt-ridden telecoms incumbent, according to a report in Italy’s Il Corriere della Sera newspaper.

Citing sources close to the matter, the Italian daily reports that Franco Bernabe, the Italian operator’s chief executive, has put the offer before the board.

Egyptian telecoms tycoon Naguib Sawiris has reportedly offered to spend as much as €5 billion ($6.4 billion) on a stake in Telecom Italia, Italy’s debt-ridden telecoms incumbent, according to a report in Italy’s Il Corriere della Sera newspaper.

Citing sources close to the matter, the Italian daily reports that Franco Bernabe, the Italian operator’s chief executive, has put the offer before the board.

An investment of €5 billion would give Sawiris about 30% of the company at current market prices, although purchasing such a big stake on the open market could force him to launch a full takeover bid.

His other option would be to convince Telecom Italia (Rome, Italy) shareholders to reduce their holdings.

A purchase would make Sawiris the latest emerging-markets investor to venture into Europe. In the telecoms industry, specifically, Mexico’s Carlos Slim has already taken advantage of the current economic conditions to acquire stakes in Telekom Austria (Vienna, Austria) and KPN (The Hague, Netherlands) of the Netherlands.

Many of Europe’s operators are desperately in need of capital, providing an opportunity to the owners of cash-rich, emerging-markets companies.

Telecom Italia has borrowed heavily to finance its activities at home and abroad, but it faces strong competitive and regulatory threats in its domestic market in particular.

Sawiris, however, is familiar with the Italian market through his investment in telecoms operator Wind (Rome, Italy) – most of which was sold to Russia’s VimpelCom (Amsterdam, Netherlands) last year – and he might feel the country’s former state-owned monopoly is currently undervalued.

Telecom Italia is controlled by holding company Telco, which has a 22.4% stake in the operator and is owned by Mediobanca (Milan, Italy) and Intesa Sanpaolo (Turin, Italy) banks, as well as insurance company Assicurazioni Generali (Trieste, Italy) and Spanish telecoms operator Telefonica (Madrid, Spain).

Last quarter, Telecom Italia’s net profit dropped by 13.4%, year on year, to €681 million. Bernabe has been looking to sell off assets with the aim of lowering debt from €29.5 billion in September to about €27.5 billion by the end of the year.