FOR IMMEDIATE RELEASE
TELECOM ITALIA SELLS ITALTEL STAKE TO CISCO
Copyright 2000 The Financial Times Limited Financial Times (London) July 1, 2000, Saturday London Edition 1 By Paul Betts
Telecom Italia yesterday sold for Euros 800m (Dollars 760m) in cash an 81 per cent stake in its Italtel telecommunications subsidiary to Cisco Systems, the world's leading manufacturer of internet networking equipment, and a group of private equity investors.
Cisco, which this year acquired for Dollars 2.15bn in stock the terrestrial optical systems business of Italian tyre and cable group Pirelli, is entering a strategic alliance with Telecom Italia to develop internet and broadband telecommunications technology.
Telecom Italia said the Italtel transaction would result in a Euros 300m gain this year. The lower figure reflects losses incurred by Italtel following extensive restructuring.
Italtel was valued at Euros 1bn, but the company lost Euros 20m last year after incurring Euros 80m in restructuring charges. Sales are expected to increase 35 per cent to Euros 1bn this year. The Italtel business was originally jointly owned by Siemens of Germany and Telecom Italia. The wireless technology and systems activities were taken over by Siemens in November.
Under the ownership deal, Telecom Italia's stake will fall to 19 per cent. Cisco will take 19 per cent, while Clayton, Dubilier & Rice, a US private equity firm, will take 50.1 per cent.
The remaining stake is being taken by two other private equity firms, Advent International and Brera Capital.
Telecom Italia said Italtel was expected to seek a stock market listing.
The company gave no timetable except to say it would not happen this year. The transaction reflects Cisco's interest in the Italian market after its deal with Pirelli.
Cisco and Telecom Italia said their industrial alliance would develop a range of services in voice, data and video to business and consumer clients based on Cisco's experience in networks and Telecom Italia's digital subscriber line and wireless solutions.
The companies will develop third generation cellular telephones based on internet protocol applications.
Telecom Italia and Cisco had been negotiating the Italtel deal for more than six months.
The transaction is in line with the strategy of Roberto Colaninno, Telecom Italia chairman, to ally with international partners while focusing the Italian group on its core telecoms activities.
Telecom Italia is integrating its internet activities with Seat Pagine Gialle, the Italian telephone directory and internet company, to create a leading European internet service and content provider.
The new combination will be controlled by Telecom Italia.
