Telefónica and its Italian partners Mediobanca, Intesa, Sanpaolo and Generali have reached an agreement to increase Telecom Italia’s capital and maintain their shareholder agreement.
The agreement provides for a capital increase in Telco, the holding vehicle that owns a 22.4% stake in the Italian telco, by issuing Class C shares without voting rights, which Telefónica will subscribe fully for a total amount of €324 million.
Telefónica will also subscribe to 70% of a bond issued by Telco for a total purchase price of €424 million, paid for with existing treasury stock.
As a result of the moves, Telefónica will raise its stake in Telco to 66% but maintain its existing voting rights at 46.2%.
The Spanish operator has the right to later increase its stake to 70% and convert the Class C shares into ordinary shares with voting rights, with the option to purchase the remainder of Telco from the Italian shareholders.
Telefónica has agreed to a standstill provision with its partners not to increase its stake in Telecom Italia, and the Spanish telco will continue to abstain from participating in or influencing decisions that affect the markets in which both companies are present.
Telefónica said it would continue to contribute to the development of Telecom Italia in its domestic market, with synergies and the sharing of best practices. It said that the deal provided renewed shareholder stability in the Italian company that would enable it to explore the best strategic options to recover its financial flexibility.