Telecom Italia SpA (TI) announced on Sept 3 that several core shareholders were looking to sell their stake, and already several parties have reportedly expressed interest. By Sept 5, Egyptian mogul Naguib Sawiris, Mexican telecom giant American Movil and AT&T Inc. (T) are all reportedly looking to grab a major stake in the beleaguered Italian telecom, causing Telecom Italia’ shares to spike in early action.
Globally, the telecom industry is in the midst of a massive shakeup, as the major players react to the announcement that Verizon Communications Inc ($VZ) is buying out Vodafone Group PLC’s (VOD) stake in Verizon Wireless for $130 billion, a deal that if completed would rank as the largest in the history of the telecom industry, and the second largest deal in the history of modern capitalism.
As part of the Verizon/Vodafone deal, there is a chance that Verizon could throw their Italian operations to Vodafone, making Telecom Italia an even more attractive target to companies looking to compete with Vodafone in the European peninsula. As Verizon solidifies their position in America, and Vodafone in Europe, the telecom giants of the world are eyeing weaker targets like Telecom Italia to increase their reach.
American Movil has already issued a denial that they are players for the stake in Telecom Italia, although the company is certainly looking to expand its empire into Europe. The Mexican telecom, headed by world’s richest man Carlos Slim Helú, is also in talks to buy out Dutch operator KPN for $9.5 billion, and Telecom Italia, with its low cost and large European network, would certainly make sense as a target.
AT&T is an interesting player, and has been looking since July to sink their teeth into the European market. Their advantage is that they can bring their superior technology to a market that is, in the words of Recon Analytics strategist Roger Entner, “stagnant and ripe for someone (like AT&T) to look at it from a different perspective.”
Sawiris is the biggest player in Egyptian telecoms, and introduced the first wireless carrier to Egypt in 1998. He has previously grabbed footholds in Greece and Russia, when he purchased a major stake in Russian telecom giant VimpelCom.
Whichever player gets into Telecom Italia will grab a sizable chunk of the company's Italian and South American business, but they will also be getting into Telecom Italia’s myriad issues. The company owes over $28 billion to various creditors, and was hit by a major antitrust lawsuit from Vodafone this summer.
Telecom Italia popped on the interest from the major telecom players. The $15.4 billion market cap company was up 9.15 percent to hit $8 a share amid heavy trading.