James Boxell is an editor with Bloomberg Gadfly. He worked previously at the Financial Times in a variety of writing and editing jobs. Before becoming a journalist, he helped launch a legal technology startup.

From just looking at the numbers, it wouldn't be immediately obvious why Telecom Italia has captured the affections of two of Europe's richest men, French billionaires Vincent Bollore and Xavier Niel.

Bollore, who's acquired a 20 percent holding through Vivendi, and Niel, who has snagged 15 percent using options, are sure to have their own reasons for investing in the long-struggling Italian carrier. But its third-quarter financial results don't really explain the appeal.

CEO Marco Patuano is making progress in fixing the domestic mobile business, where sales increased 1.5 percent year-on-year -- an improvement on the double-digit declines of previous years. And the problematic fixed-line Italian business at least appears to have stabilized. But the Brazil unit is still suffering from that country's malaise, helping to cut Telecom Italia's earnings before interest, tax, depreciation and amortization by 12 percent to 1.98 billion euros ($2.2 billion).

Proceeds from converting the company's savings stock into ordinary shares will at least provide some desperately-needed funds to spend on networks, though a vast debt pile still ties Telecom Italia's hands. Net debt was 26.8 billion euros at the end of September. The carrier's market value is 22 billion euros.

Of course, billionaires become rich by seeing opportunities that aren't apparent to the less astute. Another one, Russia's Mikhail Fridman, wants to help Brazil's Oi combine with Telecom Italia's unit in the country -- a move that could provide capital and cut the number of competitors in that market. 

Similarly, a planned merger in Italy of the mobile businesses of Fridman's VimpelCom and Hutchison Whampoa would cut the number of Italian operators to three and theoretically lessen the price pressure that has proved so ruinous to incumbent Telecom Italia.

Viva Italia

All of this -- alongside the emergence of two billionaire entrepreneurs and Patuano's recovery plan -- helps explain why Telecom Italia shares have soared this year by 34 percent, well ahead of the 13 percent rise in the index of European telecoms stocks.

It also means Telecom Italia trades at about 20 times expected earnings for the next 12 months, according to data compiled by Bloomberg. That's an 8 percent premium to the sector and not far off the 25 times for Niel's own fast-growing French operator Iliad, which has transformed that country's mobile phone market.

Bollore may have his own strategic reasons for backing Telecom Italia, including using it as a conduit to push Vivendi's TV and music content into Italy, and Niel might be positioning himself in case it ever comes up for sale. But for ordinary investors in a still under-performing business, the billionaire premium is more than priced in.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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