• M&A speculation is swirling around Telecom Italia
• European telco Iliad is reportedly interested in merging its Italian business with the national operator
• Private equity firm CVC is also believed to have renewed its interest in Telecom Italia

Less than a year after it concluded the long-drawn-out €22bn divestment of its NetCo fixed access network  to help cut its debt pile and become a leaner company, Telecom Italia (TIM) is once again the subject of M&A speculation. 

According to a report in the Italian newspaper Corriere della Sera, Xavier Niel’s Iliad Group has held talks with officials from the Italian government’s commerce ministry about the potential of telco consolidation in Italy, where a mobile service price war has been raging between the market’s four main players ever since Iliad entered the market in 2018. The Italian government, it should be noted, is a stakeholder in Telecom Italia, as it holds a 9.8% stake via state lender CDP (Cassa Depositi e Prestiti).

Iliad has already tried to merge its Italian business with Vodafone’s operation in order to gain greater scale, but Vodafone rejected Iliad’s offer and instead struck a deal with Swisscom, which has created a new, integrated, fixed/mobile operator called Fastweb + Vodafone – see Vodafone spurns Iliad’s Italian merger offer and Italy has a new mobile leader – Fastweb + Vodafone.

The report suggests that Iliad would like to combine its Italian business with the whole of Telecom Italia, which comprises its mobile and enterprise services operations: According to Reuters, Iliad has stressed it would not split the company into smaller units and would safeguard jobs (Telecom Italia has about 17,000 staff). 

According to La Stampa newspaper, Iliad has asked Boston Consulting Group to assess the potential of such a merger. Telecom Italia’s shareholders are clearly on board with the idea of consolidation as the national operator’s share price was up by more than 6% to €0.30 on the Milan exchange. 

Any such merger would create the clear market leader in Italy, with about 27 million mobile customers and a market share of about 41%, ahead of Fastweb + Vodafone (more than 20 million mobile customers for a market share of about 30%) and Wind Tre (about 19 million customers for a 29% market share). A combined Iliad Italy/Telecom Italia would also command about 40% of the fixed line/broadband services market. 

But Iliad isn’t the only company with its eyes on Telecom Italia.

Not for the first time, private equity firm CVC Capital is rumoured to be casting its eyes over Italy's national operator.  

In early 2022, CVC tabled a non-binding bid for a significant but minority stake (believed to be 49%) in Telecom Italia’s B2B unit, but the offer was deemed too low as it valued the enterprise services business at just €6bn.    

According to the Italian media and Reuters, CVC is interested in acquiring Vivendi's 24% stake in Telecom Italia with the ultimate aim of combining the telco's B2B unit with Milan-based IT services and systems integration firm Maticmind, which is controlled by CVC but which also counts CDP as a stakeholder. Such a move, though, would split up and weaken what remains of Telecom Italia and so be less appealing to the government and the national telco's board.

Telecom Italia CEO Pietro Labriola is due to report the telco’s preliminary 2024 results and provide a strategic update on 13 February.     

- Ray Le Maistre, Editorial Director, TelecomTV