Niel Says Acting Alone in Telecom Italia Stake Buy
November 04 2015 - 8:30AM
Dow Jones News
MILAN—French telecom tycoon Xavier Niel said Wednesday he is
acting on his own in buying options equal to a 15.1% stake in
Telecom Italia, the formal national monopoly in which another
French billionaire has also amassed a large stake.
The statement provides the first clue to Mr. Niel's strategy in
regards to the struggling Italian telecommunications company. The
programer-turned-billionaire has kept his cards close to his chest
since his potential 15% stake was made public last week, sparking a
wave of speculation among analysts and investors about his
intentions.
French industrialist Vincent Bolloré has also amassed a 20%
stake in Telecom Italia through media company Vivendi SA, where he
is chairman and the largest shareholder. Mr. Niel's interest could
set off a clash between two heavyweight French investors—or end up
with them working together.
"This is a legal statement. We don't know if he's going to be
hostile to Vivendi or if he's going to align with Bolloré ," Kepler
Cheuvreux analyst Javier Borrachero said. "If both vote
consistently in the same direction I would consider there is some
kind or concerted movement even if there is no written pact."
Mr. Niel was summoned to Rome on Tuesday and spent about two
hours in the offices of the Italian market regulator explaining his
intentions, according to a person familiar with the matter. The
visit followed a trip by Telecom Italia Chairman Giuseppe Recchi to
Paris last weekend to meet Mr. Niel. The meeting was relaxed and
the pair talked about the opportunities offered by Telecom Italia
as an investment, Mr. Recchi said.
Under Italian rules, Mr. Bolloré and Mr. Niel would have to
launch a takeover offer for the company if they were acting
together since their combined stakes are worth more than 25%.
People close to Vivendi have also said the two parties aren't
working together.
Mr. Niel declined to comment beyond the statement on
Wednesday.
Telecom Italia, has struggled to mount a forceful strategy to
deal with the twin challenges of Italy's protracted economic
downturn and fierce competition that has sent prices spiraling
downward in its domestic market. In the first half operating profit
fell 16%, hit by a decline in both its Italian and Brazilian
market.
But some analysts say an expected wave of consolidation in
Brazil may have pushed Mr. Niel to invest in the firm as he could
profit from any deal involving its large Brazilian business. Any
sale of Telecom Italia's Brazil unit wouldn't happen before next
summer, according to another person familiar with the matter, when
most of Mr. Niel's options can be exercised.
Russian investment firm LetterOne said in October it would
invest $4 billion in Brazilian telecom operator Oi if its proposed
merger with Telecom Italia's local unit TIM Participacoes is
successful.
The Italian operator will release its nine-months earnings on
Thursday and analysts expect the company to report a continued
improvement in Italy. Although a reversal of its struggling
performance is expected to materialize only next year, management
has indicated. Earlier this year Telecom Italia said it planned to
invest about €3 billion ($3.29 billion) in Italy's fiber network
before 2017. It will also invest in its mobile networks and is
aiming to cover more than 95% of the population by 2017.
Telecom operators across Europe have suffered amid intense
competition from low-cost entrants, changing consumer habits and
regulation that has kept pricing low in recent years, but analysts
say the sector had reached an inflection point and will start to
boost revenue next year.
"Telecom Italia has a simple business, with no big shareholders
so it's an opportunity. There are not many companies of that size,
which are independent with a structure that makes it relatively
easy to gain control," said Mathieu Robilliard, an analyst at
Barclays.
Write to Manuela Mesco at manuela.mesco@wsj.com and Nick Kostov
at Nick.Kostov@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 04, 2015 08:15 ET (13:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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