December 4, 2015 / 5:06 PM / 4 years ago

UPDATE 2-Italy government won't buy stake in Telecom Italia-sources

* Government could act to protect fixed-line network-source

* Renzi met Niel, Vivendi representatives recently - sources (Adds Vivendi spokesman saying Renzi has not met the company’s representatives since August in paragraph 12)

MILAN, Dec 4 (Reuters) - The Italian government has no intention of buying a stake in Telecom Italia to balance the growing influence of French investors in the phone group, two sources close to the matter said.

However, the government is monitoring the situation at the phone company closely and could decide to use its veto power to safeguard its fixed-line network - Telecom Italia’s most prized asset - if needed, one of the sources said.

Telecom Italia’s biggest shareholder is France’s Vivendi , which has gradually built up a stake of around 20.1 percent and is now seeking to appoint four of its representatives on its board.

Complicating the picture, French tycoon Xavier Niel, founder of low-cost telecoms group Iliad, purchased options at the end of October to buy a 15.1 percent stake in the Italian group.

This has rekindled speculation that the government may buy a stake in Telecom Italia through state holding Cassa Depositi e Prestiti (CDP) to counter the weight of the French shareholders.

“CDP is not taking a stake,” one source with direct knowledge of the situation said.

The second source said that, with Vivendi’s vision for Telecom Italia still not clear, the government did not want to get involved because it feared it would have to share the blame if decisions proved controversial, such as - for example - the sale of Telecom Italia’s mobile phone unit in Brazil.

According to the source there was some concern within the government about Vivendi’s and its chairman Vincent Bollore’s plans for Telecom Italia.

The Italian company has long been considered a strategic asset and previous governments have blocked foreign attempts to take it over. Prime Minister Matteo Renzi’s government has been open to foreign acquisitions of Italian companies, and he has not spoken publicly about Vivendi’s or Niel’s moves.

However, there is a worry that Bollore might strike a deal with Mediaset, the broadcaster controlled by former premier and centre-right leader Silvio Berlusconi, or adopt decisions that could lead to job cuts in Italy, the source said.

Renzi recently met Niel and, separately, representatives of Vivendi, the sources said, without elaborating on the content of the talks.

A Vivendi spokesman later added that none of its representatives had met with Renzi since the prime minister’s encounter with Vivendi’s chairman Bollore in August.

Vivendi said on Thursday its plan to appoint board members to represent it within Telecom Italia does not aim to interfere with the current board and the firm has no plans to merge the two groups. Niel has said he is acting independently in his investment in the group. (Reporting by Paola Arosio, Luca Trogni e Valentina Za; writing by Silvia Aloisi; editing by Ralph Boulton)

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