AT&T, America Movil seek Telecom Italia deal

NEW YORK/MILAN (Reuters) - Top U.S. phone company AT&T (T.N) said it and Mexican cell phone operator America Movil (AMXL.MX) are in talks to buy stakes in a company that controls Telecom Italia (TLIT.MI) for about 4.8 billion euro ($6.4 billion).

A potential deal will allow AT&T to expand its international business to offset a decline in its traditional phone subscriptions.

It will also help to clear clouds over the future of Telecom Italia, Italy's main carrier, which locked horns with the center-left government of Prime Minister Romano Prodi last year over its restructuring plans.

AT&T and American Movil, owned by billionaire Carlos Slim, plan to buy a third of Olimpia, a holding company and Telecom Italia's top shareholder with around 18 percent of the firm, Europe's No. 5 telecoms group.

The offers value Telecom Italia shares held by Olimpia at 2.82 euros each, minus Olimpia's debt, AT&T said in a statement.

The companies did not give a total value for their proposed investments, but AT&T said Telecom Italia's market capitalization is about 40 billion euros ($53.4 billion).

That value would make Olimpia's 18 percent stake worth around 7.2 billion euro. Should AT&T and America Movil succeed in the purchase, their stakes would be worth around 2.4 billion ($3.2 billion) each.

Olimpia and Italian company Pirelli-- which holds 80 percent of Olimpia -- said there would be exclusive negotiations until April 30.

Talks between Pirelli and a group of Italian banks for the sale of its Telecom Italia stake have been bogged down over price. Pirelli has booked the holding at 3 euros per share against a market price nearer 2.14 euros.

Italy's communications minister, Paolo Gentiloni, said there was "great concern" about the developments, which he said the government would "follow with keen attention".

Disagreements with the government last year triggered the resignation of its chairman, Marco Tronchetti Provera. Tronchetti is still chairman of Pirelli.

AT&T spokesman Michael Coe said the investment would help boost its enterprise segment, or its business of serving corporate customers -- many of which are doing business abroad.

"We need strong assets and relationships in key areas, Europe being one," he said. "By establishing a stronger, closer relationship with Telecom Italia we will be able to exchange best practices. We'll be able to do joint product and technology development."

Investment bank Mediobanca (MDBI.MI) and insurer Generali (GASI.MI), which have joined forces with Olimpia as key investors in Telecom Italia, have first refusal on the Olimpia stake.

If they take up those rights, AT&T and America Movil will each get an indemnification equal to 16 million euros.

AT&T and America Movil have also said they would offer a put option to Pirelli and Sintonia on their remaining Olimpia stake and their Telecom Italia holdings for a year after any deal.