Italian telco mashup faces tricky connection

Telecom Italia SpA

23/03/2026 12:52

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to remove extraneous line below paragraph six.

By Neil Unmack

LONDON, March 23 (Reuters Breakingviews) - Most telecom CEOs dream of deals that shrink competition, creating vast savings from lower investment spend or pushing up prices. In Italy, the sector’s big transaction is a different beast: Poste Italiane PST.MI, a government-backed post and financial services operator, has launched a 10.8 billion euro tender offer for control of Telecom Italia TLIT.MI. The deal has some strategic and financial logic, but Poste's CEO, Matteo Del Fante, still has his work cut out for him.

A Poste deal, while seemingly out of left field, isn’t as crazy as it sounds. The bidder, nearly two-thirds owned by the Italian government, has built up a 27% stake in Telecom Italia, having scooped up shares from former top shareholder Vivendi VIV.PA. While its shareholding was widely expected to remain steady, just enough to keep potential acquirer Iliad at bay, a full merger offers some tangible benefits. Poste has a vast branch network, through which it can offer a broad range of services to Italians, from financial products like insurance to mobile phones. A combined company could bundle all of these more cheaply into a kind of Italian super-app, allowing Telecom Italia to compete with the fast-growing Iliad.

Poste’s tender offer, which is intended to mop up enough Telecom Italia’s shares to bring its stake above two thirds, appears to favour the buyer. Del Fante is offering 2.8 billion euros in cash, and the remainder in Poste stock, for a combined price of 0.635 euros per share, a premium of around 9%. It’s hardly generous: Barclays analysts peg Telecom Italia's fair value at 0.62 euros per share. And, accepting the deal has an implicit cost: it would make a lucrative merger with Iliad even less likely in the short term. New Street research pegs the present value of the savings from any combination at 5 billion euros or more.

On paper, Del Fante has scope to raise his price. He expects to wring out 500 million euros of cost savings alone through lower distribution charges, and cheaper financing. The present value of those is about 3 billion euros, after taking off tax and applying a standard valuation multiple of 10, net of integration costs. Even if Del Fante shared just half of that with Telecom Italia's other shareholders, it would imply a premium of 0.08 euros a share, or about 15%, according to Breakingviews' calculations.

In practice, a big bump doesn’t look easy. For one, Telecom Italia comes with plenty of baggage. While it has cut debt by spinning off its network, it's still positioned in an ultra competitive market. And such a radical change in Poste’s business mix could spook its shareholders, especially those who are not part of the Italian government. Poste shares fell as much as 9% on Monday after the deal was announced, hardly a ringing endorsement of its expansion into telecoms.

Telecom Italia shareholders face some risk either way. Rejecting Poste’s lowball offer would still leave the company grappling with a challenging market, and potentially no closer to a deal with Iliad, given Poste’s current 27% stake. By late morning Monday Telecom Italia’s shares were up around 6%, and trading at a slim 1% premium to the current value of Poste’s offer. That suggests there’s scope to squeeze more out of Del Fante, but probably not a lot.

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CONTEXT NEWS

Poste Italiane on March 22 announced a tender offer for Telecom Italia, worth 10.8 billion euros, for the stock it does not already own in the Italian group.

Poste will offer 0.167 in cash and 0.0218 of its own shares for each Telecom Italia share, valuing the target at 0.635 euros per share. Poste already owns a 27% stake in Telecom Italia.

Poste Italiane shares were down around 9% at 19.475 euros as of 1022 GMT. Telecom Italia shares were up around 3%, and trading at 0.5912 euros per share.

Telecom Italia has outperformed peers since Poste Italiane bought in https://www.reuters.com/graphics/BRV-BRV/lbpgybdkepq/chart.png

(Editing by Aimee Donnellan; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on UNMACK/neil.unmack@thomsonreuters.com))