Telecom Italia Investor Group Unravels as Generali Begins Exit

Assicurazioni Generali SpA said it has begun to exercise its right to sever links with partners in the group that’s Telecom Italia SpA’s biggest shareholder, unraveling a seven-year investment agreement.

The insurer, which owns 19 percent of Telco SpA, the vehicle that holds a 22.4 percent stake in Telecom Italia, said today its board agreed to exercise a “demerger option,” giving its chief executive officer the mandate to “define the exact procedure to implement the exit” from Telco.

An agreement among Telco shareholders last September -- Spain’s Telefonica SA, Intesa Sanpaolo SpA and Mediobanca SpA are the other partners -- give them the right to unwind their interests starting this weekend. The investors have written down their stakes multiple times over the years as intensifying competition in phone and Internet services has hurt sales, earnings and Telecom Italia’s stock price.

Mediobanca, the investment bank with a 7.3 percent stake in Telco, will follow Generali, a person with knowledge of the matter said last month, asking not to be identified because the matter isn’t public.

Unwinding the investors’ holdings could take six months. After the demerger, each partner will get back Telecom Italia shares as well as its share of debt. Telco has total debt of 2.47 billion euros ($3.3 billion), according to its most recent financial report. At the end, Telefonica would directly own about 15 percent of Telecom Italia.

“The shareholders agreement will still bind Generali until the deadline of Feb. 28, 2015 or, should the demerger be earlier finalized, until the process is completed, subject to the fulfillment of the necessary requirements before the competent authorities,” Generali said today in a statement.