MILAN: If debt-laden Telecom Italia SpA wants to agree a tie-up with Hutchison Whampoa Ltd , it may first have to sell its strategic fixed-line network to the state.
Franco Bernabe, chairman of Italy's former telecoms monopoly, was tasked last week alongside four directors with looking into a deal that would make the Hong Kong-based group Telecom Italia's biggest shareholder.
Although the $4 billion plus tie-up has obvious attractions, as it would create large cost-saving opportunities and ease competition pressures at a time when recession is biting into margins, it faces formidable obstacles.
Most immediately, it risks crashing against a wall of political opposition to foreign ownership of a company deemed to have strategic national significance.
Telecom Italia employs 54,000 people in Italy and is one of the country's largest private-sector employers.
Its network, estimated to be worth between 12 billion euros ($15.7 billion) and 15 billion, is Italy's largest telecoms infrastructure operator, linking millions of users from private citizens to government agencies, banks and businesses.
And its stock market value of some 11.5 billion euros makes it one of the country's 10 most valuable companies, just ahead of truckmaker Fiat Industrial SpA, according to Reuters data.
The outgoing technocrat government of Mario Monti has remained silent on the issue so far, but politicians and trade unions have already voiced concerns.
"If Telecom ended up under the control of Hutchison, the key issue would be the fate of the network and of its enormous data asset base," Paolo Gentiloni, centre-left politician and former communication minister, told Reuters.
"Keeping Telecom in Italian hands is not something to defend at any cost, but access to the network has a strategic value that must be safeguarded," Gentiloni added.
Even though the network needs costly upgrade investments, it generates cash and helps Telecom Italia, burdened by more than 28 billion euros of debt, keep its leading market position.
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