MILAN/ROME: Signs of interest from foreign bidders in Telecom Italia overshadowed a board meeting on Friday to discuss the company's options after failing to expand in Brazil and struggling to exit from Argentina.
Top of the meeting's formal agenda was the sale of its stake in Telecom Argentina - a $960 million deal the Italian group agreed nearly a year ago but that is now in doubt because it has not yet been cleared by regulators.
The bigger issue at Telecom Italia however is how the company will reshape its strategy to compete in a saturated European market, find new growth opportunities in Brazil and adjust to consolidation that is creating bigger global players.
On Friday the head of an Italian company controlled by Naguib Sawiris, the Egyptian tycoon whose attempt to buy a stake in Telecom Italia for 3 billion euros was rejected by the board in 2012, said he was still interested in investing.
Adding to the air of intrigue around European's ninth largest telecoms group, Raffaele Tiscar, a top official at the Italian prime minister's office, said he had met US businessman Sol Trujillo to discuss Telecom Italia.
According to a Bloomberg report on Thursday, Trujillo is seeking to raise 7.5 billion euros to bid for a stake in the Italian group.
"I've seen Trujillo as I see many others," Tiscar told Reuters. A senior investment banker said it was not the first time Trujillo had moved to approach Telecom Italia, but doubted that this would translate into a serious proposal.
Telecom Italia's evolving shareholder base is making it a more vulnerable takeover target.
"That Telecom is up for grabs is clear," a government source said on Friday. "It could even happen rather quickly."
FROM HUNTER TO PREY
Telecom Italia, which owns Brazil's No.2 mobile operator, has been forced to regroup after losing out to Spanish rival Telefonica in the bidding battle for Vivendi's Brazilian GVT business.
Burdened by more than 27 billion euros of net debt, in need of cash to carry out costly network upgrades and lacking a clear direction, it has turned from hunter to potential prey, several investment bankers have told Reuters. However, that is not an unfamiliar scenario.
Its board has rejected approaches from Sawiris and Hong Kong's Hutchison Whampoa in the past two years. The Italian government has the power to block any hostile move on a company that owns the country's biggest phone network - seen as a strategic asset for national security.
A year ago, sources told Reuters that AT&T and Mexican billionaire Carlos Slim's America Movil - who had already unsuccessfully tried to take over Telecom Italia in 2007 - could be interested in taking a stake.
The shareholder structure is changing. Telefonica, which is still Telecom Italia's largest indirect shareholder with a 14.8 percent interest, is selling an 8.3 percent stake to Vivendi as payment for GVT.
Italian financial institutions also want out of what has been a money-losing investment since 2007.
ARGENTINA EXIT?
The sale of Telecom Argentina to Mexican billionaire David Martinez's investment company Fintech, agreed last November, has stalled because of regulatory uncertainty.
Telecom said late on Thursday that Fintech had asked for a further extension on the deal in a last-minute attempt to prevent it from falling apart. An initial August deadline to complete the sale has already been pushed back twice and Telecom Italia's CEO Marco Patuano has signalled he is running out of patience.
A group of small investors said on Friday the company should hang on to its stake in Telecom Argentina, reflecting growing unease among shareholders about the planned exit. Failure to complete the sale would leave the incumbent with less cash to invest in faster networks and 4G services, a major plank of Patuano's strategy.
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