Spain’s Telefónica SA has taken another big step in efforts to become a key provider of mobile and broadband telecommunications services in Europe and Latin America after agreeing Saturday to acquire a stake in Telecom Italia SpA.
The investment in Telecom Italia adds to the Spanish company’s growing list of purchases, including its 2005 acquisition of O2 PLC, which provide mobile phone service in the large German and U.K. markets.
The deal also ends months of speculation about the future of the Italian telco, which has attracted a number of suitors including AT&T and Mexico’s América Móvil SA.
Through a plan designed to win support of the government in Rome, Telefónica will team with a group of Italian investors to form the joint holding, Telco SpA, which will acquire a 23.6% stake in Telecom Italia.
The Spanish telco will pay $3.1 billion for a 42% stake in the new holding, giving it a 10% stake in Telecom Italia and two seats on the board.
By establishing a presence in key European markets, Telefónica aims to make it easier and more cost-efficient to provide mobile phone and broadband Internet services to businesses with distributed operations.
The linkup between two large southern European telcos has won a nod of approval — but also a warning about competition — from Viviane Reding, the European Union commissioner in charge of telecoms.
“The fact that two of Europe’s major telecom incumbents are now teaming up in a cross-border deal is a strong signal that a pan-European telecom market has started to develop,” Reding said in a statement. But the European telecom watchdog warned that the alignment also underscored the need “for ensuring a regulatory level-playing field for telecom operators across Europe.”
Analysts, for the most part, view the Telefónica-Telecom Italia tie-up as positive.
After months of speculation, the Italian company can now focus on developing and implementing a business strategy that it “badly needs to carry out properly,” Ovum principle analyst Stefano Nicoletti wrote in a research note.
Through its investment in Telecom Italia, Telefónica gains access to Telecom Italia Mobile (TIM), one of Europe’s most innovative mobile phone operators, which also has operations in Latin America.
Last year, the chairman of Telecom Italia was forced to resign after announcing a plan to sell TIM — just two years after the company spent billions of euros to buy back the former spin-off.
Already a dominant force in Latin America, the Spanish operator has also expanded into China after buying a stake in China Network Group (Hong Kong).
Although Cesky Telecom AS, in the Czech Republic, is another of Telefónica’s successful European acquisitions, the company failed to take over neighboring Portugal Telecom.
(Additional reporting by Paul Meller in Brussels.)
