Telecom Italia and Hutchison in talks to merge in Italy

Operator group Telecom Italia has confirmed it is in talks over a potential merger with Hutchison Whampoa’s Italian operation.

Telecom Italia told regulator Consob that “preliminary contacts” have taken place with the Hong Kong operator group to study a possible integration with Three Italia.

“The contacts are in such immature and preliminary status that the company cannot further comment on the news,” the firm added in a statement.

The operator added that the topic will be discussed by Telecom Italia’s Board of Directors in a meeting April 11, 2013.

Hutchison, which operates its Three brand in 14 countries worldwide has been struggling in Italy, amassing just 6.7 million subscribers as of December 2012, according to Informa’s WCIS, compared with market leader Telecom Italia which had 32.1 million subscribers at the same time. The country’s number two and number three operators’ subscriber numbers also dwarf that of Three Italia, with Vodafone Italia and Wind boasting 26.3 million and 21.6 million subscribers respectively.

According to Emeka Obiodu, telco analyst at Ovum, it is for these reasons that Hutchison has been looking to offload its Italian business.

“This is not necessarily a surprise, Hutchison has been trying to exit the market for long time now, so if any opportunity arises, Hutchison will grab it,” he said. “This isn’t just because of the macroeconomic climate in Italy, Three Italia just hasn’t built the foundation that it wanted.”

According to Italian newspaper, La Repubblica, the deal could see Hutchison Whampoa with a ten per cent stake in Telecom Italia. The Italian group also has businesses in Argentina and Brazil, however despite the fact the Hong Kong firm’s reach does not extend to the Americas, Obiodu does not foresee Hutchison using this deal to expand its geographic presence.

“This deal is focused on Telecom Italia and Hutchison in Italy – it is my hunch that there is nothing beyond this,” he said. “Hutchison runs its operations very independently unlike a firm such as Vodafone, which is a lot more integrated.