Telefonica has struck a deal with other leading shareholders that will see the Spanish operator gradually build its influence over Telecom Italia.
The net effect of an agreement with Italian members of the Telco consortium, which controls Telecom Italia, is that Telefonica will increase its stake in the investment vehicle from 46 per cent to 66 per cent in an initial phase, although its voting rights stick at the former figure.
The agreement provides for a capital increase in Telco by issuing Class C shares without voting rights, which Telefonica will subscribe fully to for a total sum of €324 million. At the same time, the operator will reach 70 per cent of the bond issued by Telco for a total price of €424 million, which will be paid for with existing treasury stock.
The Italian partners in Telco are Mediobanca, Generali and Intesa Sanpaulo. Telco’s shareholding in Telecom Italia is 22 per cent.
The agreement follows protracted negotiations.
A second phase, which is subject to regulatory approval, would see the influence of the Italian shareholders further diminished from next year.
In this phase, Telefonica would increase its Telco investment to 70 per cent. In addition, the operator will have the option to convert the Class C shares into ordinary shares with voting rights. It will also have the option to purchase the rest of the Telco shares from its Italian partners.
The agreement puts forward two windows – June 2014 and February 2015 – when the Italian shareholders can withdraw from Telco, providing Telefonica with the opportunity for a gradual takeover of the investment vehicle.
The capital increase of non-voting shares in Telco brings stability to the structure of Telecom Italia, said Telefonica, so maintaining the Italian operator’s independence.
Telefonica has reached a standstill provision with its partners not to further increase its stake in Telecom Italia. It will also continue to abstain from participating or influencing decisions which would impact markets where both companies are present, it says.
Crucially, Telefonica said the agreement will not impact its commitment to reduce net debt to below €47 billion by the end of this year.