Telefonica and Zain both play down merger rumors

by Caroline Gabriel, Rethink Wireless

Two international telecoms giants are busily playing down merger reports this week. Spanish group Telefonica is throwing cold water on speculation around a merger with Telecom Italia, while Kuwait-based multinational Zain denies it has received any offers for its African operations, in the wake of the departure of its CEO Saad al Barrak.

Telefonica has been surrounded by reports that bankers are hammering out a deal to sell or break up the Italian incumbent, but chairman Cesar Alierta insists he is content with getting the most value from the existing indirect shareholding in Telecom Italia and is not considering an acquisition bid.

The Reuters news agency quoted Telefonica sources saying that Alierta was convinced that the group’s “relationship with Telecom Italia is an industrial alliance and what most interests the company are the synergies and the economies of scales derived from that”.

In response to the speculation, Telecom Italia CEO Franco Bernabe met with the country’s industry minister Claudio Scajola on Thursday and promised to keep the government informed about any changes in the relationship with Telefonica. The Spanish group is an indirect shareholder in Telecom Italia via a 46.18% stake in Telco, a holding company that owns 22.5% of the Italian firm. Antitrust regulators in Argentina are currently trying to force Telecom Italia to relinquish its stake in Telecom Argentina because of its links with rival Telefonica.

Over at Zain, the company is set to become smaller in the era after al Barrak, who built the group up from little known MTC to a major player across the Middle East and Africa. It has been considering selling its sub-Saharan African operations since the summer, but talks with potential bidders like Vivendi of France have fallen through.

Talk of an imminent deal, perhaps with South Africa’s MTN, has resurfaced in the past days, but Zain says it has not received any offers for its African mobile networks. “There are no current offers and the company will inform the bourse’s administration with any new information that may come up regarding this issue,” Zain said in a statement to Kuwait’s stock exchange. According to the state’s Al Anbaa newspaper, there were also revived talks with Vivendi, and also with fellow French group France Telecom/Orange, and with Vodafone. Both of these European mobile powerhouses have been expanding rapidly in Africa in recent years. Zain’s African units could be valued as high as $12bn.
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