Telecom Italia Talks on Hutchison Wireless Merger Said to Stall
2013-07-02 13:38:55.394 GMT
By Daniele Lepido, Matthew Campbell and Manuel Baigorri
July 2 (Bloomberg) -- Telecom Italia SpA’s discussions with
Hutchison Whampoa Ltd. over a proposed merger of their Italian
mobile-phone assets have stalled amid disagreements over
valuation, according to four people familiar with the matter.
Telecom Italia directors, three months after agreeing to
examine a combination with Hutchison’s H3G unit, will probably
decide on halting the project at a meeting this week, said two
of the people, asking not to be identified because the
deliberations are private. Telecom Italia executives intend to
focus on spinning off the company’s fixed-line assets, a plan
approved by its board at the end of May, they said.
While Telecom Italia could revisit a wireless merger in the
future, putting the plan on hold would be a lost chance to
consolidate in Europe’s overcrowded mobile-phone industry
through a combination of Italy’s biggest and No. 4 carriers. In
Ireland, Hutchison last week agreed to acquire Telefonica SA’s
local unit for as much as $1.1 billion.
While H3G has a so-called fair value of 1.5 billion euros
($1.9 billion), the lack of clarity on how much of the carrier’s
accumulated losses can be used to offset taxes means the price
could differ by billions of dollars, a person familiar with the
matter said in May.
A representative for Milan-based Telecom Italia couldn’t
immediately be reached for comment. A spokesman for Hutchison’s
Italian unit declined to comment. A Hutchison spokesman in Hong
Kong couldn’t be immediately reached for comment after regular
office hours.
‘Complex’ Deal
Franco Bernabe, Telecom Italia’s chief executive officer,
told analysts May 9 that reaching an agreement with billionaire
Li Ka-Shing’s Hutchison would be “complex” because of
regulatory obstacles. Telecom Italia and H3G together control
44.6 percent of Italy’s wireless subscribers based on first-
quarter data compiled by the Agcom regulator. Wind SpA and
Vodafone Group Plc are the other network carriers.
A failed linkup between Telecom Italia and Hutchison
wouldn’t be a first. Hutchison held discussions in 2010 over a
sale of the business to Telecom Italia, and the talks didn’t
result in a deal because of differences in valuation, people
with knowledge of the matter said at the time.
Telecom Italia had initially planned to recommend a
decision on Hutchison by early June pending a month-long “in-
depth” review. Board members postponed their ruling at a June 5
meeting. They are scheduled to meet July 4 in Milan.
Some members of a Bernabe-led panel tasked with the review
were skeptical about a transaction from the beginning, while
leading Telecom Italia shareholder Telefonica was concerned
about potential losses in any deal, a person familiar with the
matter said in May.
Telefonica is the biggest investor in Telco SpA, which owns
almost 22.5 percent of Telecom Italia. Other Telco shareholders
are Assicurazioni Generali SpA, Intesa Sanpaolo SpA and
investment bank Mediobanca SpA.
Mediobanca said last month it intends to exit from Telco’s
investor agreement and sell its 2.6 percent holding in Telecom
Italia within three years.