Leading stakeholders in Telecom Italia are interested in selling their shares amid raised expectations following Verizon’s $130 billion deal to buy Vodafone out of their US joint venture, reports Reuters.
According to sources familiar with the matter, investors in Telco, which controls 22.4% of Telecom Italia (Milan, Italy), are looking to take advantage of the current market conditions and cash in their shares, with Vodafone (Newbury, UK), Japan’s SoftBank (Tokyo) and Mexico’s America Movil (Mexico City) seen as possible buyers, according to brokerage firm Bernstein.
However, Telefonica (Madrid, Spain), the largest shareholder in Telco, may be forced to buy shares owned by other members of the consortium – including Mediobanca (Milan, Italy), Assicurazioni Generali (Trieste, Italy) and Intesa Sanpaolo (Turin, Italy) – to prevent them from falling into the clutches of an undesirable partner.
One problem there could be regulatory opposition from South America, where Telefonica and Telecom Italia operate rival networks.
Investors have been disappointed by the recent performance of Telecom Italia, which faces economic headwinds in its domestic market and remains burdened by a net debt of some €28 billion ($36.89 billion).
Meanwhile, Vodafone has announced plans to use part of its windfall from the Verizon (New York City, NY, USA) sale to fund network improvements in Europe, and may be interested in buying network assets as part of those plans.
According to Bernstein, Telecom Italia’s shares are relatively cheap compared with those of its rivals, largely because of a risk the operator might have to sell shares simply to avoid a credit-rating downgrade to junk status.
According to Reuters, Bernstein has calculated Telecom Italia’s enterprise value at less than four times estimated core profits for 2013, which compares with an average of about five times estimated 2013 profits for its peers.