Telecom Italia: A History of Privatization, Debt & Ownership Changes
Telecom Italia is set to return to public ownership nearly three decades after its privatization in 1997, following an offer from Poste Italiane to acquire the full stake in the telecommunications company for €10.8 billion. The move marks a significant shift for the company, which has struggled with mounting debt and declining market position since its initial public offering.
The privatization, initiated by the government of Romano Prodi, aimed to address Italy’s public debt and prepare the country for the introduction of the Euro. However, according to reports, the sale resulted in a company burdened with debt and hampered by a series of ownership changes and strategic missteps. In 1997, Telecom Italia was the sixth-largest telecommunications company globally; by 2022, it had fallen to seventeenth, according to analysis by Milena Gabanelli and colleagues at Dataroom – Corriere della Sera.
The initial share offering saw a group of banks and entrepreneurs acquire 6.6% of the company, while the Agnelli family secured a 0.6% stake, assuming a controlling position. This early ownership structure was described as “poco solido e litigioso” – unstable and contentious. The company, formed in 1994 from the merger of Iritel, Telespazio, Italcable, and SIRM, all previously part of the state-owned STET group, had initially launched Tim, Italy’s first mobile phone operator, in 1995. At the time of privatization, Telecom Italia reported no net debt, held approximately thirty international participations, a real estate portfolio valued at over €10 billion, and employed over 120,000 people.
The intervening years have been characterized by a series of attempted takeovers and financial difficulties. The accumulation of debt prevented necessary investment in modernizing the network, leaving 2.8 million Italian households without connection as of 2022, as noted by Gabanelli. The current offer from Poste Italiane represents a full takeover bid, signaling a return to state control after a turbulent period for the company. The deal is currently under review.