Benetton Familiy Exit Telecom Italia Consortium

­Italy's Benetton family is leaving the consortium that has control of Telecom Italia after reportedly being disappointed with the investment.

The move could strengthen Telefonica's involvement in the company, which is likely to cause political concerns in Italy. As Telecom Italia and Telefonica have several overlapping assets in Latin America, a merger of the two companies has often been expected, although the Italian government has expressed opposition to such a move. The joint shareholdings have also caused problems in Argentina, although much of that was politically inspired.

Telefonica has two seats on the Telecom Italia board on condition that its board members abstain from decisions regarding the Latin American markets where the companies' operations overlap.

The remaining shareholders in the Telco Consortium, which owns 24.5% of Telecom Italia renewed their agreement for a further three years, with an early exit built-in that enables the shareholders to break the group up in April 2011.

Telefonica retains its indirect 10% stake in Telecom Italia though its 42.3% holding in Telco, together with Italian banks Intesa Sanpaolo, Mediobanca and insurance broker, Assicurazioni Generali. The Benetton holding company, Sintonia had an 8.4% stake in the Consortium.

Last month, Italy's deputy communications minister said that Telefonica's stake in Telco as a "significant problem."

In April 2007, Pirelli and the Benetton family agreed to sell their stakes in Olimpia, the unlisted holding company that held 18% of Telecom Italia in a deal valued at EUR4.1 billion. The sale marked Pirelli's final exit from Telecom Italia's management, after a costly investment in 2001 by its chairman Tronchetti Provera, who saw Telecom Italia shares' value almost halved in six years.

Posted to the site on 29th October 2009