Telecom Italia ends contacts with Hutchison on mobile merger

Telecom Italia has ended contacts with Hutchison Whampoa on merging their Italian mobile businesses, preferring to focus on a plan to spin off its fixed-line network.

Italy’s biggest telecoms player said conditions were not in place to start official talks with the Hong Kong-based conglomerate on a tie-up with its 3 Italia unit. “At present there are not the elements necessary to start negotiations,” it said in a statement.

Yet the breakdown of talks with Hutchison could refocus investor concerns on Telecom Italia’s debts of €28.8 billion and the weak conditions in its domestic market that have eaten into margins.

Contacts between the Italian operator and the Hong Kong-based group, which is backed by magnate Li Ka Shing, were first disclosed in April. But Telecom Italia in June postponed a decision on the Hutchison linkup, focusing instead on a separate deal to spin off its fixed network into an independent company.

Telecom Italia board member Tarak Ben Ammar said talks with Hutchison Whampoa were off. "They are definitely finished," he said after a meeting of the company's board.

Hutchison, whose 3 Italia is the country’s smallest mobile player with a 10 per cent market share, has been seeking consolidation opportunities to bolster its position in six European markets.

It agreed last week to buy Telefonica’s 02 business in Ireland for as much as €850 million. – (Reuters)