Xavier Niel Says He Is Acting Alone in Telecom Italia Stake Buy

By Manuela Mesco and Nick Kostov 

MILAN--French telecom tycoon Xavier Niel said Wednesday he is acting on his own in buying options equal to a 15.1% stake in Telecom Italia, the formal national monopoly in which another French billionaire has also amassed a large stake.

The statement provides the first clue to Mr. Niel's strategy in regards to the struggling Italian telecommunications company. The programer-turned-billionaire has kept his cards close to his chest since his potential 15% stake was made public last week, sparking a wave of speculation among analysts and investors about his intentions.

French industrialist Vincent Bolloré has also amassed a 20% stake in Telecom Italia through media company Vivendi SA, where he is chairman and the largest shareholder. Mr. Niel's interest could set off a clash between two heavyweight French investors--or end up with them working together.

"This is a legal statement. We don't know if he's going to be hostile to Vivendi or if he's going to align with Bolloré," Kepler Cheuvreux analyst Javier Borrachero said. "If both vote consistently in the same direction I would consider there is some kind or concerted movement even if there is no written pact."

Mr. Niel was summoned to Rome on Tuesday and spent about two hours in the offices of the Italian market regulator explaining his intentions, according to a person familiar with the matter. The visit followed a trip by Telecom Italia Chairman Giuseppe Recchi to Paris last weekend to meet Mr. Niel. The meeting was relaxed and the pair talked about the opportunities offered by Telecom Italia as an investment, Mr. Recchi said.

Under Italian rules, Mr. Bolloré and Mr. Niel would have to launch a takeover offer for the company if they were acting together since their combined stakes are worth more than 25%. People close to Vivendi have also said the two parties aren't working together.

Mr. Niel declined to comment beyond the statement on Wednesday.

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.

But some analysts say an expected wave of consolidation in Brazil may have pushed Mr. Niel to invest in the firm as he could profit from any deal involving its large Brazilian business. Any sale of Telecom Italia's Brazil unit wouldn't happen before next summer, according to another person familiar with the matter, when most of Mr. Niel's options can be exercised.

Russian investment firm LetterOne said in October it would invest $4 billion in Brazilian telecom operator Oi if its proposed merger with Telecom Italia's local unit TIM Participacoes is successful.

The Italian operator will release its nine-months earnings on Thursday and analysts expect the company to report a continued improvement in Italy. Although a reversal of its struggling performance is expected to materialize only next year, management has indicated. Earlier this year Telecom Italia said it planned to invest about EUR3 billion ($3.29 billion) in Italy's fiber network before 2017. It will also invest in its mobile networks and is aiming to cover more than 95% of the population by 2017.

Telecom operators across Europe have suffered amid intense competition from low-cost entrants, changing consumer habits and regulation that has kept pricing low in recent years, but analysts say the sector had reached an inflection point and will start to boost revenue next year.

"Telecom Italia has a simple business, with no big shareholders so it's an opportunity. There are not many companies of that size, which are independent with a structure that makes it relatively easy to gain control," said Mathieu Robilliard, an analyst at Barclays.

Write to Manuela Mesco at [e-mail] and Nick Kostov at [e-mail]

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November 04, 2015 07:25 ET (12:25 GMT)

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