Telecom Italia to continue exploring potential tie-up with Iliad

By Elvira Pollina

MILAN (Reuters) -Telecom Italia (TIM) will continue to explore the possibility of a tie-up with French-owned rival Iliad as it still believes consolidation is needed to make Italy's telecoms sector sustainable, Chief Executive Pietro Labriola said on Thursday.

"We will continue to pursue the possibility of a deal with Iliad," Labriola told analysts on a call after TIM released quarterly earnings.

However, he added that it "would not be a nightmare" for TIM if an alternative tie-up happened between Iliad and rival Wind Tre.

Any tie-up between Iliad, owned by French billionaire Xavier Niel, and TIM or Wind Tre would reduce the number of mobile network operators in Italy to three from four and require the approval of European Union antitrust regulators.

Iliad's entry into Italy seven years ago sparked aggressive price competition in the retail telecoms market, especially in the mobile segment.

TIM, the heir to Italy's phone monopoly, is set to return to state-backed hands with financial conglomerate Poste Italiane replacing France's Vivendi as its single largest investor with a 24.8% stake.

PARTNERSHIPS

Having sold its prized landline network last year, in a move aimed at slashing debt, TIM is expected to play a role in the long-awaited consolidation of Italy's telecoms sector, which has been under pressure for years amid stiff price competition.

Iliad, which has been pushing for consolidation, had approached the government about TIM, but Rome put any talk about a potential combination on hold, as Poste's investment took precedence, Reuters reported in February.

Labriola welcomed Poste as a shareholder that would give the company "long-term industrial stability".

Having expanded beyond its traditional mail and parcel business to offer financial and insurance products, Poste also provides mobile and fixed-line broadband services to some 5 million customers.

It will start buying mobile network capacity from TIM starting next year as part of a separate agreement.

Beyond that, Labriola said the companies are jointly evaluating partnerships in areas such as payments, energy and digital content as well as in the ICT sector, with details expected after the summer.

Asked about a press report suggesting TIM was going to drop cloud partnerships to switch to Poste's provider Amazon Web Services, the executive said TIM will continue to press ahead with a multi-cloud strategy.

"We already have partnerships with big players...it doesn't mean that we don't have the possibility to discuss further developments. But I think that the way in which it was put in the press is not the right one", Labriola said.

(Reporting by Elvira PollinaEditing by Keith Weir, Kirsten Donovan)