Telefonica has reached an agreement with its Italian partners, Mediobanca, Intesa Sanpaolo and Generali, to maintain their shareholder agreement with regard to Telecom Italia and to reinforce the balance sheet of Telco, the holding vehicle which owns 22.4 percent of Telecom Italia. The agreement provides for a capital increase in Telco, by issuing Class C shares without voting rights, which Telefonica will subscribe fully for a total amount of EUR 324 million. Simultaneously, Telefonica will reach 70 percent of the bond issued by Telco for a total purchase price of EUR 424 million, paid for with existing treasury stock. Telefonica thus increases its stake in Telco to 66 percent, while maintaining its existing voting rights at 46.2 percent.
In a second phase, subject to receiving the corresponding regulatory approvals, Telefonica will have the right to increase its position in Telco to 70 percent. In addition, Telefonica will have the option to convert the Class C shares into ordinary shares with voting rights and it will have the option to purchase the rest of the Telco shares from its Italian partners.
Telefonica has agreed to a standstill provision with its partners not to increase its stake in Telecom Italia. In addition, Telefonica will continue to abstain from participating or influencing those decisions which affect the markets in which both companies are present. Telefonica renews its commitment to contribute to the development of Telecom Italia in its domestic market, with synergies and the sharing of best practices.
Telefonica says that this agreement does not alter its plans of reducing net financial debt below EUR 47 billion by end-2013, as the transaction structure provides for a neutral impact on the company’s leverage.
