Pirelli takes 80% of Telecom Italia

Italian tyre manufacturer Pirelli paid out Eur1.17bn (£788m) on Wednesday for two 4.77 per cent stakes in Italian holding firm Olimpia, which controls Telecom Italia.

Pirelli acquired the holdings under previous option agreements made with Banca Intesa and Unicredito Italiano. Pirelli’s stake in Olimpia now rises to 80 per cent, with the remaining 20 per cent held by Benetton.

But Pirelli is now expected to come under pressure to consolidate Olimpia’s debt into its own balance sheet – a condition which analysts believe may dramatically influence a decision to sell off mobile unit TIM.

Speaking with recently, Gartner analyst, Monica Basso forecast that Pirelli would have to buy up the quotes of Banca Intesa and Unicredito Italiano if it could not find someone else to buy them instead. “If Pirelli has to buy, it will have also have to consolidate Olimpia’s debt (Eur 41.3bn) to its balance sheet.”

Basso conjectures that Pirelli cannot allow this to happen and explains why it would need to get rid of the debt now. In other words sell off TIM to protect Pirelli.

Earlier this week the Italian operator issued a statement denying reports that Italian bankers were plotting to step in and save Telecom Italia from falling into foreign hands.

On Tuesday, a reported 80 per cent of the company’s 63,000 employees took to the streets to protest against proposals to spin off TIM as a separate entity. A move many see as an indication that the unit is to be put up for sale.

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