Telecom Italia Signs Italy's First MVNO as AT&T, América Móvil Eye Takeover Bid 

Telecom Italia has signed an MVNO deal with Italy's largest retailer, the COOP, to end finally the dearth of MVNOs in the Italian market. In a joint statement on 30 March, the two companies said the deal will enable the COOP to offer mobile services in Italy and abroad using Telecom Italia's network and international roaming agreement. The service, branded COOPVoce, will have a trial launch this month, with a full commercial launch slated for the third quarter of 2007. The COOP chairman, Vincenzo Tassinari, said his company will set its own prices and commercial policy for the MVNO service, and plans to win one million customers and make 200 million euro (US$267 million) in revenue by 2010.

Meanwhile, speculations about a takeover of Telecom Italia's holding company, Olimpia, came to a head today as it emerged that the U.S. telecoms giant, AT&T, and Mexico-based América Móvil are in exclusive talks with the Italian conglomerate, Pirelli, to buy into Olimpia. The U.K.-based Times newspaper reports that AT&T and América Móvil are in talks to buy 33% each of Pirelli's 80% stake in Olimpia, valuing the holding company at about 9.5 billion euro. Olimpia controls 18% of Telecom Italia, and is 20%-owned by Italy's Benetton family. The report adds that AT&T, which owns an 8% stake in América Móvil, has said a deal is contingent on América Móvil also getting clearance for its stake purchase. In a statement, AT&T spokesman Michael Coe said the investment would help boost its enterprise segment. "We need strong assets and relationships in key areas, Europe being one," he remarked, adding that, "by establishing a stronger, closer relationship with Telecom Italia we will be able to exchange best practices. We'll be able to do joint product and technology development".

Outlook and Implications

COOPVoce to Break Deadlock: The deal to launch the COOPVoce service will finally end the deadlock over the introduction of MVNOs in Italy but it does not, however, guarantee success. Several other companies, including the Italian broadband provider, FastWeb, and the United Kingdom's BT group, have tried to no avail as the quartet of Italian mobile operators—Telecom Italia, Vodafone, Wind and 3 Italia—had remained opposed to an MVNO. But recent events in neighbouring countries have heightened pressure on the Italian market. In Switzerland, the COOP launched an MVNO on Swisscom Mobile's network in 2005. Similarly, in France, the retailer Auchan launched an MVNO in 2006. Further afield, US retail giant Wal-Mart has an MVNO in Germany and the UK's retail group, Tesco, operates the country's second-largest MVNO. However, although an Italian MVNO was overdue, there is no guarantee that the service will be a success. Italy has one of the highest mobile penetration rates in Europe at over 120%, leaving little room for organic growth. Instead, given that Telecom Italia expects the MVNO deal to be a prelude to further deals over broadband, the deal could open an opportunity for the Italian giant to tap into the COOP's retail market dominance. The COOP is Italy's largest retailer with a 17.1% market share and 6.5 million members (see Italy: 2 June 2006: BT Eyeing Italian MVNO Operations and 18 January 2006: FastWeb Mulls MVNO Roll-Out, Plans Quadruple-Play Services).

Will Italy's Government Bulge: Although AT&T has the clout to pull off a takeover of Olimpia, there is no guarantee that it will succeed, given the political dimensions of the deal. For a start, AT&T may have muddied the water by packaging a deal with América Móvil and consequently insisting that a deal was contingent on América Móvil getting its stakes too. Already the Italian government has expressed great concern about the potential agreement, suggesting its opposition to the foreign composition of the takeover team. The communications minister, Paolo Gentiloni, added that the government would follow developments on the deal with keen attention. The government has been holding out for a consortium of Italian banks to take control of Olimpia and is thus far less likely to throw its weight behind the AT&T deal. It may prod the investment bank, Mediobanca, and insurer Generali—co-shareholders with Olimpia in Telecom Italia and companies that have first right of refusal for Olimpia—to block the deal. If, however, Telecom Italia follows FastWeb by falling into foreign hands, all of Italy's top five telecoms companies would be controlled by foreigners. Given the political tsunami that would follow such a deal, plus the precarious position of Italy's ruling coalition government, the Italian administration may prove an imposing obstacle (see Italy: 12 March 2007: Swisscom Launches US$4.86 bil. "Friendly" Bid for FastWeb, 12 February 2007: Telefónica Eyes Stake in Telecom Italia, 22 January 2007: Pirelli Confirms Ongoing Talks on Sale of Telecom Italia Stake and 21 November 2006: Olimpia, Mediobanca, Generali Unveil Plan to Block Foreign Takeover of Telecom Italia).