Telefónica eyes Brazil deal after sealing Telecom Italia control

Telecom Italia’s Italian shareholders have struck a deal with Telefónica for the Spanish operator to gradually increase its stake in Italy’s largest telecoms operator paving the way for a potential sale of its Brazil operations.

The deal will allow Telecom Italia's domestic investors Mediobanca, Generali and Intesa Sanpaolo, to exit Telco, the holding company that controls around 22 percent of Telecom Italia, and gradually cede control to Telefónica. The deal also marks a watershed in foreign acquisitions of Italian companies. Italy has seen an increase in foreign takeovers as a decade of economic stagnation and two-year recession are hitting sales and profits forcing business owners to seek outside capital. But the sale of a majority stake in the holding company Telecom Italia is the first time a former state monopoly has ceded to foreign control. Analysts think it may lead to further deals such as a mooted takeover of Alitalia, Italy's cash-strapped national airline, by Air France-KLM.