Spain’s Telefonica has renewed its controversial stake in Telco, the holding company that controls 24.5 percent of Telecom Italia, in what is being described by investors as a muted vote of confidence in the struggling Italian giant. Reuters reports that Telefonica has renewed its pact until April 2013 though investors are able to quit after April 2011. However, one Telco shareholder – the Benetton family investment vehicle Sintonia – is to exit the business immediately. The remaining investors in Telco – which also include insurer Generali and banks Mediobanca and Intesa Sanpaolo – will each raise their stake in the group to make up for the Benetton departure, a source said.

Telefonica is currently Telco’s largest shareholder (42.3 percent) and its ongoing commitment was deemed crucial. “The most important thing is that Telefonica remains involved, that is important to both Telefonica and Telecom Italia for extracting synergies,” said Michael Kovacocy, telecoms analyst at Daiwa. “In terms of Benetton walking away, this is just one chapter closing and now we’re moving on.” Reuters notes that the decision by Telco shareholders to renew the pact may have also been motivated by the need to avoid writedowns on their investments as Telecom Italia’s shares still remain well below their value on Telco’s books. Telco’s stake in Telecom Italia has often raised anti-trust concerns in markets such as Argentina where both Telefonica and Telecom Italia control rival operators.