MILAN: Telecom Italia SpA shares jumped as much as 10 percent yesterday, on speculation it might be the next quarry in a recent upsurge in dealmaking in Europe’s telecoms industry.
Analysts at brokerage Bernstein said a lowly valuation, an attractive business in Brazil and a willingness among some Telecom Italia shareholders to sell could make the company a takeover target before the year is out.
They tipped Vodafone, Telefonica Softbank, and AT&T — possibly in combination with Mexican billionaire Carlos Slim’s America Movil — as potential bidders and said the shares could double from current levels.
At 1330 GMT, Telecom Italia shares were up 9.6 percent at ¤0.4176, the biggest rise by a European blue-chip stock , after touching a one-month high of ¤0.4218.
The company was not immediately available to comment on the speculation.
The telecoms sector has seen a surge in dealmaking as companies look to take advantage of low interest rates, and as European players battle to cope in a saturated market with recession-hit consumers and expensive network upgrades.
US group Verizon Communications Inc is close to buying an outstanding stake in Verizon Wireless from Vodafone Group Plc for potentially $130bn, sources close to the matter have said, while a report said AT&T would examine Vodafone’s remaining assets.
Spain’s Telefonica has agreed a deal to buy German mobile operator E-Plus from KPN, while Carlos Slim’s America Movil (AMX) threatened yesterday to abandon a plan to buy the rest of KPN after the Dutch group’s foundation said it might block a deal.
A Milan-based broker said Slim’s next port of call could be Brazil, via Telecom Italia.
“We believe that America Movil could well make Telecom Italia an offer they can’t refuse for (its Brazilian asset) TIM Brazil,” said the broker, who asked not to be named.
Shares in debt-laden Telecom Italia have been languishing near historic lows due to falling margins in Italy and a slowdown in Brazil, its other main market.
“Telecom Italia is the cheapest of stocks we cover, trading at just 4.0 times EBITDA (earnings before interest, tax, depreciation and amortisation), a 22 percent discount to incumbent peers,” the Bernstein analysts said, referring to other firms with leading positions in their home markets.