Telecom Italia Possible Takeover Battle Looms
October 29 2015 - 2:10PM
Dow Jones News
Telecom entrepreneur Xavier Niel has become the second French
billionaire to buy a significant foothold in Telecom Italia SpA,
raising the specter of a takeover battle—or possibly a joint bid --
for the struggling Italian telecommunications company.
Italy's market regulator said Thursday that Mr. Niel, founder
and controlling shareholder of French telecom firm Iliad SA, has
purchased options to buy an 11.2% stake in Telecom Italia. Most of
the options, purchased through a personal investment vehicle, are
exercisable beginning next summer, the regulator said.
The move could set up a clash between two heavyweight French
investors—or lead them to end up working together. French
industrialist Vincent Bolloré has himself amassed a 20% stake in
Telecom Italia through media company Vivendi SA, where he is
chairman and the largest shareholder.
A person familiar with Mr. Bolloré 's thinking said he wasn't
working together with Niel. Mr. Niel declined to comment.
Italy's market regulator is looking into whether there are any
links between the two stakeholders, a spokesman said. A person
close to Telecom Italia said the company was caught by surprise by
Mr. Niel's move.
Telecom Italia, the heavily indebted former Italian monopoly, is
a ripe target within Europe's fragmented telecommunications
markets. The company's poor performance in recent years has
depressed the stock, making it among the cheapest in Europe. But
the shares' low value has also drawn the interest of investors
looking for a turnaround in the Italian behemoth.
Mr. Bolloré , known as one of France's savviest but most
unpredictable businessmen, has been steadily increasing his stake
in Telecom Italia in recent months as he looks to put Vivendi's
roughly $9 billion war chest accumulated through asset sales to
work.
One of France's richest men, Mr. Bolloré has built a reputation
as a feared corporate raider. At French advertising group Havas, he
started by taking a small stake in 2002, quickly building his
shareholding before ousting the chairman and overhauling the
company's strategy. More recently, it took him two years to tighten
his grip on Vivendi, starting with a 5% stake.
Mr. Niel is known as the enfant terrible of French telecoms
because he shook up the country's fixed and later mobile landscape
with Iliad, creating a slick new operator that offers service at
rock-bottom prices, sparking a fierce price war among the country's
telecom firms.
The programmer-turned-billionaire has also become a prolific
investor, though mostly in assets valued at less than $1 billion,
including a number of startups with which he has had considerable
success. An 11% stake in Telecom Italia currently has a market
value of about €2.35 billion ($1.59 billion).
But Mr. Niel has also taken bites at bigger fish. Mr. Niel last
year agreed to acquire Orange Switzerland—since renamed Salt -- for
around €2.3 billion through NJJ Capital, his private holding
company.
Iliad last year also made a failed $15 billion tilt at Deutsche
Telecom's American unit T-Mobile US, a move that surprised the
market. People familiar with the matter have said that Iliad will
eventually want to go for another big, transformative deal, partly
to put its management team to work on another large-scale project,
after barnstorming France's mobile arena since 2012.
An Iliad spokeswoman said: "Iliad and its subsidiaries do not
own any shares or rights in Telecom Italia, either directly or
indirectly."
Some analysts said it would make sense for Messrs Niel and
Bolloré to work together, with Mr. Bolloré bringing expertise in
media through his company Vivendi and Mr. Niel bringing much-needed
innovation in telecoms.
"Bolloré is an expert in the game of taking stakes and
controlling companies. Going against him is tough," wrote Charles
Bedouelle, an analyst at Exane BNP Paribas.
Others said it looked like an opportunistic play from Mr.
Niel.
"He knows that Telecom Italia is an attractive target from an
M&A perspective, that in Europe at some point there might be
cross-border activity," Kepler Cheuvreux analyst Javier Borrachero
said.
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.
More recently, Telecom Italia has sought to tackle some of its
problems. It launched an initial public offering for its shares in
a cell-tower business and spent €2.1 billion in the first half of
this year to bolster its ultra-broadband network—slowing its
decline in Italy. Nonetheless, analysts still expect its Brazil
business to pull revenue down this year.
Manuela Mesco in Milan contributed to this article.
Write to Nick Kostov at Nick.Kostov@wsj.com and Eric Sylvers at
eric.sylvers@wsj.com
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(END) Dow Jones Newswires
October 29, 2015 13:55 ET (17:55 GMT)
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