Telecom Italia's core owners seek to sell-sources

By Danilo Masoni and Stefano Rebaudo

MILAN, Sept 3 (Reuters) - Core investors in Telecom Italia (Milan: TIT.MI - news) are seeking to sell their stakes, people familiar with the situation said, a move that could leave the country's largest telecom operator open to a takeover bid.

Verizon Communications' $130 billion deal to buy British operator Vodafone (LSE: VOD.L - news) out of its U.S. wireless business, announced on Monday, has raised investors' expectations of a sector shake-up with Telecom Italia seen as a possible target.

The company, controlled by a group of shareholders via holding Telco, has so far failed to find a partner to inject new funds as it struggles with a recession in its home market and net debt of more than 28 billion euros ($37 billion).

The Italian investors in Telco are prepared, in varying degrees, to sell their shares as they get the first opportunity to leave the shareholder pact by Sept. 28, the sources said on Tuesday.

That means Spain's Telefonica, which has the largest stake in Telco, could face the choice of buying the Italian investors' shares or risk them selling to a possible predator.

Analysts at brokerage Bernstein last week tipped Vodafone, Telefonica, Japan's Softbank (Xetra: 891624 - news) , and AT&T - possibly in combination with Mexican billionaire Carlos Slim's America Movil - as potential bidders for Italy's largest telecom operator by market value.

Telco, which also includes Italian companies Mediobanca (Milan: MB.MI - news) , Assicurazioni Generali (Milan: G.MI - news) and Intesa Sanpaolo (Milan: ISP.MI - news) , controls 22.4 percent of Telecom Italia, worth around 10 billion euros at the current market price.

One of the sources said Telefonica wanted to keep Telecom Italia's shareholder structure intact and would "react immediately" if its control was threatened.

However, even if Telefonica was willing to buy out the other Telco members, such a deal might be opposed by regulators in Latin America where the Spanish company competes directly with Telecom Italia.

Italian bank Mediobanca is looking either for a buyer of its share of Telco, which would need approval from the other members of the pact, or to sell its Telecom Italia stake on the market after leaving the pact, one of the sources told Reuters on Tuesday.

"Mediobanca is a seller either of Telco or Telecom Italia shares," the source said.

In June, Mediobanca Chief Executive Alberto Nagel said he favoured market consolidation and that Telecom Italia needed a new shareholder structure to face up to its challenges.

Insurer Generali is also seeking to sell its shares, but needs to find a buyer that can pay a hefty premium to match its book value for the stake which is about twice Telecom Italia's market value, a source familiar with the situation has told Reuters.

Intesa Sanpaolo is also open to selling, another source said.

Telefonica and the Italian shareholders declined to comment.

Telecom Italia shares are cheap compared with competitors, reflecting the risk that the company might have to sell new shares to avoid a downgrade of its credit rating to "junk" status, Bernstein analysts have said.

They calculate its enterprise value at below four times 2013 estimated core profits, below an average of more than five times for its peers.

Telecom Italia shares closed up 1.9 percent at 0.5605 euros on Tuesday, adding to a 17 percent rally in the previous two trading sessions.

In the last year, Telecom Italia has walked away from talks for a possible tie-up with Hong Kong's Hutchison Whampoa (HKSE: 0013.HK - news) and for a 3 billion euro cash injection offer from Egyptian tycoon Naguib Sawiris.