It’s been a quiet week in telecoms, but rumours around Telecom Italia show no sign of slowing down.
After another week of are they or aren’t they speculation, Orange (EPA:ORA) has strenuously denied it is in takeover talks with Telecom Italia (BIT:TIT). The company, however, stopped short of ruling out future talks.
“Contrary to some press rumours and other speculation, Orange can confirm that there are no discussions with Telecom Italia or any plans for a merger, either directly or indirectly,” a spokesperson told TelecomFinance.
A spokesperson for Telecom Italia referred to comments earlier this week by CEO Marco Patuano, who said: “I don’t know what Orange is doing and I have not had any contacts with any telecoms operators that could be interested in a consolidation at European level.”
The French telco, which did confirm to Reuters that it had hired banks to help it “fine-tune its view of the evolution of the telecoms sector in the context of a single [European] market on a five to ten-year horizon,” has declined comment on whether these are BNP Paribas and Morgan Stanley.
A spokesperson for Morgan Stanley declined comment, while BNP Paribas was not available in time for the press deadline.
Once it formulates a longer-term European strategy, the company could reportedly approach the Italian incumbent or other European groups.
Richard has on multiple occasions earlier this year publicly mentioned a possible interest in Telecom Italia, only to backtrack. The French group has also been linked to possible interest in Dutch incumbent KPN (AMS:KPN), which unwelcome shareholder América Móvil has decided to exit.
An irresistible target
Long touted as a takeover target for everyone from Libyan sovereign wealth funds to Egyptian billionaire Naguib Sawiris, Italian investors, former part-owner Telefónica, and more recently former Telstra CEO Sol Trujillo and French billionaires Vincent Bolloré and Xavier Niel, Telecom Italia still appears to hold appeal.
Whether the Italian government will be more open to a foreign buyer this time is unclear. Also unclear – to some, at least – is what is to be gained from an acquisition.
Telecom Italia would be expensive – it has a market cap of €22.68bn (US$16.98bn) and net debt of €26.8bn (US$28.6bn). Furthermore, its share price has risen 33% over the past 12 months, which is likely to have benefited 20.1% owner Vivendi.
The company is at the start of a programme to deploy national high-speed broadband, which it will have to finance, with some help from the government and probable infrastructure support from utilities.
Patuano last week told a parliamentary committee that the group was on track to raise €3bn next year, thanks to the company’s proposed savings share conversion, its €1.3bn (US$1.4bn) mandatory convertible bond due November 2016, listing of more shares in tower spin-off Inwit and the sale of Telecom Argentina.
Other possible value-enhancing moves include the sale of TIM Brasil, which has however been more or less on the block for three or four years and now appears to depend on outside initiatives by Letter One or other ambitious investors able to broker a tie-up with rival Oi.
Another idea, mooted by bankers a few years ago, was a sale of the company’s network. This was later dismissed as too complicated to execute, as – one could argue – many of the initiatives may be.
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