Billionaire Niel Buys Telecom Italia Stake, Follows Vivendi

  • Telecom Italia shares had jumped up to 11 percent in Milan
  • Vivendi, Niel together have about 30 percent voting rights

Billionaire Xavier Niel bought a 1.7 billion-euro ($1.9 billion) stake in Telecom Italia SpA, becoming the second-largest investor after Vincent Bollore’s Vivendi SA and giving the two Frenchmen more clout in reshaping strategy at one of Europe’s most indebted phone companies.

Niel, the founder of broadband provider Iliad SA, holds securities giving him an 11 percent voting stake in Telecom Italia through his personal investment company, according to a regulatory filing. Financial details weren’t disclosed. Telecom Italia shares jumped as much as 11 percent earlier on Thursday after Bloomberg reported the holding.

Iliad founder Xavier Niel
Iliad founder Xavier Niel
Photographer: Eric Piermont/AFP/Getty Images

Together, Niel and Bollore, chairman of the owner of Universal Music Group and broadcaster Canal Plus, hold about 30 percent of Telecom Italia. Until earlier this year, Italy’s largest phone company had been controlled by Spain’s Telefonica SA and a group of Italian financial investors. Their replacement by the two French shareholders comes as Telecom Italia Chief Executive Officer Marco Patuano seeks to revive the company’s local business and sell asset to reduce a debt load of almost 27 billion euros.

Telecom Italia is the biggest mobile and broadband carrier in the country of about 60 million people. It also controls Brazil’s second-biggest wireless provider, Tim Participacoes SA.

Telecom Italia shares closed 8.7 percent higher at 1.26 euros in Milan. Including savings stock that doesn’t carry voting rights, the company has a market value of 23.1 billion euros. Vivendi rose 0.8 percent in Paris.

Italy’s Consob market regulator is reviewing whether Niel and Vivendi may be acting in concert on Telecom Italia, according to an official at the watchdog. Vivendi didn’t ask Niel, 48, to invest in Telecom Italia, according to a person familiar with the matter. A representative for Vivendi declined to comment. Iliad said it doesn’t own shares or voting rights in Telecom Italia, neither directly nor indirectly.

Speaking to reporters in Milan on Thursday, CEO Patuano said he didn’t see the two French billionaires acting together to take over Telecom Italia.

Niel, with a net worth of $7.5 billion according to the Bloomberg Billionaires Index, has invested in dozens of startups including mobile-payments company Square and music-streaming startup Deezer. He has also made personal investments in telecommunications outside France, buying Orange Switzerland last year for $2.9 billion.

In France, Iliad has transformed the telecommunications industry by slashing mobile tariffs, sparking a price war that has led to firings, restructuring and asset disposals at rivals such as SFR and Bouygues Telecom. It made an unsuccessful bid last year to acquire T-Mobile US Inc. from Deutsche Telekom AG.

For Vivendi, which is is executing a plan to create a media group with a distinct focus on southern Europe, collaboration with telecommunications carriers would help it distribute TV series and movies.

Last year Italy lowered the threshold for a mandatory takeover offer to 25 percent from 30 percent for companies with a market capitalization of more than 500 million euros and revenue above 300 million euros in an effort to protect minority shareholders and to discourage investors who aren’t committed to a long-term industrial plan.

Telecom Italia has long been a candidate in a wave of European telecommunications mergers and acquisitions, well before Bollore and Niel’s entry. Orange SA, France’s largest phone company, in March stoked speculation of a linkup with Telecom Italia after its CEO Stephane Richard said the Italian company could be “a great opportunity for European consolidation.”

Even though Richard later stepped back from those comments, he has remained a consistent defender of cross-border mergers in Europe, as well as consolidating France’s four-carrier market into three. Orange is also a business partner for Iliad, having signed a roaming agreement in 2011 that allows Niel’s company to sell wireless packages before building its own network. That contract is still in place.

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