AT&T, America Movil May Acquire Stake in Telecom Italia

In a press release yesterday, Pirelli & C. S.p.A. said it received two proposals to purchase two stakes in Olimpia, a holding company with an 18% stake in Telecom Italia, from AT&T and America Movil. Each firm aims to buy a 1/3 stake. Pirelli owns 80% of Olimpia, and AT&T owns 8% of America Movil. Pirelli mentions the proposals value Telecom Italia at €2.82 ($3.77) per share (excluding debt). Telecom Italia closed last Friday at €2.14. Bloomberg estimates each one-third stake is worth approximately $3.2 billion. Despite the 32% premium over Friday's close, it will still result in a €3.6b loss for Pirelli, according to The Wall Street Journal. Pirelli said there will be exclusive negotiations with both parties until April 30, although two Italian banks have right of first refusal. Italy's Communications Minister said he was "extremely worried" about the possible sale to foreign companies and the Journal says he encouraged Italian banks and investors to counterbid. An AT&T spokesman commenting on the proposal said, "We're a global company now, and it's very important for our global customers that we have strong assets and strong relationships around the world."

Sources: Press release, Bloomberg, Reuters, The Wall Street Journal
Commentary: The World's Top 25 Emerging Market Multinationals • AT&T, Quest and Verizon, But Not Sprint, to Compete for Big Govt. Contracts • Telecom Italia's Fixed-Mobile Divorce [Sept. '06]
Stocks/ETFs to watch: AT&T (T), America Movil (AMX), Telecom Italia (TI). ETFs: iShares Dow Jones U.S. Telecom Sector Index (IYZ), Telecom HOLDRS (TTH), BLDRS Emerging Markets 50 ADR Index (ADRE)

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