Cable and Wireless of Britain and Telecom Italia are in talks on a strategic alliance, and have agreed that the Italian company will acquire Cable's stake in French company Bouygues Telecom, the companies said yesterday.
The talks are aimed at creating the world's second largest international communications carrier through a combination of the two companies' networks, Telecom Italia said. The alliance would enlarge the two companies' coverage of key markets in continental Asia, Europe and the Americas in a "substantial manner", Telecom Italia said.
Cable & Wireless already has a strong presence in Ireland and is well-respected in the telecommunications industry worldwide. Industry observers have been marking the US group for some time as a candidate to become involved in a significant merger or alliance. Such a move would enhance the group's position as a carrier for telecommunications traffic.
"Cable & Wireless has agreed in principle to sell Telecom Italia its 20 per cent interest in Bouygues Telecom, the French mobile operator," the British company said in a statement.
"Cable and Wireless is also exploring with Telecom Italia opportunities for co-operation on their respective international networks and provision of services to global customers." The companies did not put a price on the sale of C & W's Bouygues Telecom stake to Telecom Italia, but the 20 per cent stake is estimated by analysts at £600 million sterling. The agreement will have to be approved by competition authorities.
Telecom Italia already holds a stake in Bouygues Telecom, its key partner in the Italian market for both mobile and fixed phones.
Some 55 per cent of Bouygues Telecom is in the hands of a holding company in which Telecom Italia has a 20 per cent stake. Telecom Italia is the sixth biggest operator in the world in terms of fixed telephones and has more than 25 million customers.
Telecom Italia also said that it has signed a memorandum of understanding with state broadcaster RAI to form a joint company that will manage, operate and distribute a digital TV and multimedia platform for the Italian market.
Telecom Italia said the platform will be open to both national and international operators.
Telecom Italia said its planned link-up with Britain's Cable & Wireless did not rule out a yet-to-be-finalised alliance with US telecommunications giant AT&T.
"The alliance with Cable & Wireless doesn't exclude the alliance with AT&T. The two things are separate," a Telecom Italia spokesman said.
