AT&T Abandons Italian Bid
AT&T and Carlos Slim's América Móvil S.A. de C.V. announced earlier this month they were interested in buying a stake in Olimpia from the holding company's current majority owner, Pirelli SpA (Milan: PECI.MI). (See AT&T Closes In on Telecom Italia Stake.)
That announcement caused an outcry in Italy, especially amongst politicians who are leery of Olimpia (and therefore Telecom Italia's board) being controlled by non-Italian interests. (See Telecom Italia: Mama Mia!, Eurobites: M&A Hotbed, and The Latest Italian Job.)
Late Monday, AT&T announced that "it appreciated the opportunity to explore a possible investment in Olimpia and a strategic partnership with Telecom Italia, but has decided not to pursue the matter further."
An AT&T spokesman says the carrier isn't providing "any additional commentary" around its decision. But Pirelli, in its own statement to announce AT&T's withdrawal from negotiations, stated that AT&T's decision was "motivated by the possible regulatory difficulties linked to the transaction."
Ovum Ltd. analyst Mike Cansfield, in a research note issued today, notes that "concern in the Italian government about foreign ownership of what it sees as strategic national assets is the cause of the breakdown. Not unreasonably AT&T sees this proposed investment as too risky, so it has withdrawn."
Cansfield believes this "leaves TI looking stranded… Selling a stake in the company was a means to act as a counterweight to political interference. But as this exercise has shown, a stake in the company is no insurance against political realities of business (and politics) in Italy."
Telecom Italia's share price dipped more than 2 percent this morning to €2.33 on the news.
AT&T had seen Telecom Italia as a good strategic fit for its European plans because of the business assets the Italian carrier has in key markets such as Germany and France. But AT&T isn't saying if it will now turn its European attentions elsewhere and seek an alternative acquisition. "AT&T will always evaluate options for investment and sees [AT&T Global Network Services ] as an important part of its business," says the European spokesman.
But while AT&T has pulled out, América Móvil, along with another Carlos Slim vehicle, Teléfonos de México (Telmex) , is retaining an interest.
In a statement made after AT&T's announcement that it was ducking out, the Mexican mobile operator said it will continue, along with Telmex, "considering different alternatives for a potential investment in Olimpia." (See Telmex Looks at Olimpia.)
Ovum's Cansfield, though, noted "it would be a surprise to us" if América Móvil doesn't follow AT&T's lead and pull out of the talks.
The news of AT&T's decision coincides with fresh speculation that some major European carriers are considering bids, possibly with Italian partners, for a stake in Olimpia. Names in the frame include Telefónica SA (NYSE: TEF), in partnership with Italian bank Mediobanco, and Orange (NYSE: FTE), which has, according to British newspaper The Times, appointed Morgan Stanley as an advisor on the issue.
And news agencies reported Italian Prime Minister Romano Prodi, currently visiting Japan, as saying he hoped Telecom Italia would remain under Italian control, and that he believes other bidders will likely enter the fray.
Meanwhile, Telecom Italia is currently holding a prolonged Annual Shareholders Meeting that, due to the highly charged atmosphere caused by Pirelli's willingness to sell a controlling stake in Olimpia, has spilled into a second day. During the first day a new board of directors was appointed and the 2006 accounts approved, but the carrier is still (as this article was written) without a new chairman following the recent resignation of Guido Rossi. (See T Italia Shareholders Approve and Telecom Italia Chairman Quits.)
The identity of the new chairman, who will play a key role in working with any new Olimpia shareholders, is expected to be revealed today.
— Ray Le Maistre, International News Editor, Light Reading