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AT&T on Monday became the latest company to pull out of talks for a big stake in Telecom Italia as the negotiations foundered over regulatory uncertainty.

Pirelli, the tyre group, owns 18 per cent of TI in a holding company called Olimpia. It has exercised control through this minority stake by nominating a majority of the board.

It had been talking to AT&T and América Móvil of Mexico about selling a third of its Olimpia stake to each and having an option to sell the rest in a year.

América Móvil, noting AT&T’s withdrawal, said it would continue “considering different alternatives for a potential investment in Olimpia”.

AT&T said it “appreciated the opportunity to explore a possible investment in Olimpia and a strategic partnership with Telecom Italia, but has decided not to pursue the matter”.

AT&T’s interest in Olimpia ran into difficulties last week over domestic opposition to control of TI moving into foreign hands and moves by the government quickly to alter the sector regulator’s powers.

AT&T told Pirelli there were “regulatory uncertainties and resulting business issues”, according to a letter obtained by the Financial Times. Last year Abertis of Spain cancelled a planned merger with Autostrade of Italy after Romano Prodi’s government started a huge overhaul of the industry’s regulation and structure. The European Commission has been investigating the government’s actions and last week also had a discussion with Rome about telecoms regulation.

The collapse of the talks may pave the way for a resumption of negotiations with Telefónica of Spain, which has tried to construct a deal with Pirelli.

Any foreign buyers could have the same political problem as AT&T and América Móvil, which stressed they were not seeking a takeover of TI.

But they were prepared to pay Pirelli a big premium in an indication that they believed the tyre company’s shares carried control.

Intesa Sanpaolo, the bank, had led a search for Italian investors to join in a deal with AT& T and América Móvil in the hope that a sizeable domestic investment would allay political opposition.

But Intesa and possible partners had suggested keeping governance of TI in Italian hands even while two-thirds of Olimpia would be sold to AT&T and América Móvil.

AT&T’s departure is another blow to Marco Tronchetti Provera, chairman of Pirelli, who until last September had also been chairman of TI and has since tried to sell Pirelli’s stake.

TI shareholders were holding a stormy meeting on Monday in which the management was berated by a horde of angry investors.

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Copyright The Financial Times Limited 2019. All rights reserved.

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