* Group says needs to bridge differences over valuations
* To take extra month to assess feasibility of deal
(Adds board to meet to decide on network spin-off plan on May
By Lisa Jucca and Danilo Masoni
MILAN, May 8 Telecom Italia delayed a
decision on Wednesday on whether to seek a merger deal with
Hutchison Whampoa, buying more time to win over its
In a statement, Italy's biggest phone company said it would
take up to 30 days to assess whether it and Hutchison could
bridge differences over valuations.
In a related move it also said the board agreed to meet
again on May 23 to decide on the possible separation of its
politically sensitive fixed line network, which analysts reckon
could be worth 12-15 billion euros.
The debt-laden company, under pressure to improve
shareholders' returns, said last month that Hutchison was
interested in becoming its biggest investor by merging its 3
Italia mobile business into Telecom Italia and buying additional
shares from current key shareholders, which include rival
Failure to tie up with a cash-rich partner like Hutchison or
to sell a stake in its fixed-line network could force Telecom
Italia to consider other ways to cut its 28.8 billion euros of
debt and fund costly network upgrades.
A special committee set up to assess the potential Hutchison
deal acknowledged that there were "no impediments to start a
discussion with the other party (Hutchison) in view of the
possible completion of the transaction."
Yet, Telecom Italia investors are divided on a potential
deal with Hutchison, several sources with knowledge of the
situation have said.
"There is no mandate to open merger talks," Telecom Italia
board member Tarak Ben Ammar said on Wednesday. "We have decided
to continue assessing the situation with the aim of finding a
way to improve share prices and create value."
Ben Ammar said all four investors in Telco, a shell company
that owns 22.4 percent of Telecom Italia, were in principle not
against the deal. These investor paid more than three times the
current market price to buy Telecom Italia shares in 2007.
But two sources with knowledge of the situation have said
Telefonica, currently Telecom Italia's biggest investor
with a 10.5 percent stake held indirectly through Telco, is
strongly against a tie-up.
Telefonica said on Wednesday it was supportive of any action
that Telecom Italia, whose credit ratings are one notch above
investment grade, could take to improve its value.
Analysts have said Telecom Italia could raise money by a
cash call or a sale of Brazil's TIM Participacoes as
an alternative to a deal with Hutchison.
Telecom Italia shares closed down 0.6 percent. The stock had
rallied 25 percent from near record-lows since media reports
last month of a possible tie-up.
Telco investor IntesaSanpaolo has said it is open
to a deal while insurer Generali and investment bank
Mediobanca, also in Telco, have some reservations,
people familiar with the situation have said.
($1 = 0.7642 euros)
(Additional reporting by Stefano Rebaudo and Francesca Landini
in Milan and Clare Kane in Madrid; Editing by Erica Billingham
and Greg Mahlich)