Telecom Italia’s Core Shareholders Looking to Get Out, Spurring Takeover Speculation

Jacob Harper  |

In a move that may signal the beginning of the end for debt-ridden Italian telecom company Telecom Italia SpA (TI) , on Sept. 3 several major shareholders of the company announced they were actively seeking buyers of their stake in the company. With the combined low valuation of Telecom Italia, a major development the week prior in the telecom market, and the core shareholders' newly expressed desire to sell out, Telecom Italia is now perfectly poised for a takeover.

On Aug. 29 , Vodafone Group PLC ($VOD) renewed talks to sell out their stake in Verizon Communications’ (VZ) wireless division for some $130 billion. Following this major shakeup, analysts began looking for more big moves from the major telecoms as they jockey to re-establish position. WIth stakes in Italy, Argentina and Brazil, Telecom Italia could provide a rival with significant strategic footholds.

However, despite their reach, the company is still saddled with massive debt, owing at least $37.6 billion to various creditors. This debt has kept the $14.17 billion market cap company’s stock languishing in the basement.

Telecom Italia has also been saddled by a series of devastating setbacks in the summer of 2013 that have sent their stock spiraling downward. On July 16, the stock plummeted when talks to merge with Huchison Wampoa Ltd. were permanently scuttled. On Aug. 8, the company was sued for $1.3 billion by Vodafone for allegedly abusing their dominant position in Italy.

Vodafone is thought to be a leading candidate to buy out Telecom Italia. AT&T (T) is also on the short list of potential buyers of the company.

On July 23, Telecom Italia received a brief reprieve from the string of bad news when it appeared the company had overcome stumbling blocks to a much-needed merger as regulators gave plans to spin off its struggling wireline sector the greenlight. That spin-off, were it to occur, would make Telecom Italia a much more attractive target for a takeover.

With the Sept. 3 news that the company could be soon taken over, shares of Telecom Italia shot up. While the stock is still down 27.06 percent on the year, the increased possibility of a takeover sent the stock up 6.2 percent to hit $7.36 a share.

(image of Telecom Italia phone booths courtesy of Wikimedia Commons)

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