Feature Article

Free eNews Subscription>>
April 26, 2013

Hong Kong Company May Buy Italy's Largest Mobile Network

If a deal being considered by Telecom Italia goes through, the Chinese company Hutchinson Whampoa could end up owning Italy's fixed-line telephone network.

Currently, the Italian government controls the network, and the Treasury has veto power over the organization. Some Italian politicians have expressed concern about a foreign company owning a strategic national asset.

Telecom Italia has struggled with major financial losses as a result of bad investments, according to EuroInvestor. Although the company has made some money by expanding into Argentina and Brazil, its large debt load has limited its investments in upgrading its infrastructure.

While Telecom Italia commands a 35 percent share of Italy's mobile market, it posted a decline in revenue of 5.8 percent during Q1 2012. Moody's also downgraded Telecom Italia bonds to just one level above junk.

A source told Reuters that Hutchinson would be willing to spin off the fixed-line service and just invest in Telecom Italia's mobile assets. Spinning off the fixed-line network could net 12 to 15 billion euros.

"The Chinese want to do this deal on the third- and fourth-generation mobile business. They are not interested in the fixed-line business," the source said.

A state-owned Italian fund called Cassa Depositi e Prestiti may be willing to take on the fixed-line network along with assuming Telecom Italia's 28 billion euros worth of debt.

At the same time, Hutchinson may sell its 3 Italia mobile business and buy out some shareholders to acquire Telecom Italia's mobile network. Owning 3 Italia would give Telecom Italia 45 percent of mobile market share, which may bring up antitrust concerns for the Italian government.

Although Hutchinson has commented little on the deal, analyst firm Nomura suggested earlier in April that the deal may not go through without the cash-generating fixed-line network.

"Contacts between Telecom Italia and 3 Italia on possible business combinations are still very preliminary and of an exploratory nature," said a Hutchinson Whampoa spokesperson.

Edited by Rory J. Thompson

FOLLOW MobilityTechzone

Subscribe to MobilityTechzone eNews

MobilityTechzone eNews delivers the latest news impacting technology in the Wireless industry each week. Sign up to receive FREE breaking news today!
FREE eNewsletter