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Telefónica is confident of reaching an exclusive industrial alliance with Telecom Italia after the Spanish telecoms group agreed to pay €2.3bn ($3.1bn) to join a consortium buying a controlling stake in the Italian company.

The consortium, led by Italian financial institutions, is buying Olimpia, the investment vehicle through which Pirelli and the Benetton family had a controlling stake in Telecom Italia.

The deal is a blow to América Móvil, the Latin America mobile phone operator controlled by Carlos Slim, the Mexican billionaire, which had been trying to buy a Telecom Italia stake.

Pirelli, the Italian tyre group, will receive €3.3bn in cash from the Italian-led consortium, in a deal that gives Olimpia an equity value of €6.8bn.

Telefónica is turning its attention to concluding an industrial alliance with Telecom Italia that is supposed to generate €2bn of annual cost savings.

Cesar Alierta, Telefónica’s chairman, has received verbal assurances from Telecom Italia that it was willing to enter an alliance, said one person close to the situation.

The alliance should generate cost savings via joint purchasing of telecoms equipment by Telefónica and Telecom Italia and sharing of fixed-line and mobile networks. Telefónica wanted an exclusive alliance in countries where it and Telecom Italia overlap, such as Brazil and Germany, said the person familiar with the matter.

Last month Telefónica and Telecom Italia agreed the former could use the latter’s fixed-line network in Germany to sell fixed broadband to mobile customers.

The consortium also includes Intesa Sanpaolo and Mediobanca, the Italian banks, Generali, the insurance company, and the Benetton family. It is forming a holding company through which it will become Telecom Italia’s largest shareholder with a 23.6 per cent stake.

Telefónica will own 42.3 per cent of the holding company’s equity, giving it a 10 per cent economic interest in Telecom Italia. At €2.3bn, Telefónica has agreed to pay the equivalent of €2.82 per Telecom Italia share, 25 per cent above Telecom Italia’s market price.

The Italian investors will own 57.7 per cent of the holding company’s equity, giving them a 13.6 per cent economic interest in Telecom Italia. Telefónica will nominate two of Telecom Italia’s directors while the Italian investors will put forward 13.

Copyright The Financial Times Limited 2017. All rights reserved.
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