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Is this the end of the 'Italian' telco as we know it?

With Telefonica's move on Telecom Italia, Italy's biggest telcos are increasingly passing into foreign ownership. But does it really matter who's in control?
Written by Raffaele Mastrolonardo, Contributor

The biggest piece was the last to fall.

There are many facets to the news that Telefonica is upping its interest in Telecom Italia. For many in Italy, chief among them is that the announcement means the country's biggest telco is de facto no longer 'Italian'. A quick look back over the past 20 years shows a domino line of telcos being bought up by foreign firms, with Italy's incumbent this week becoming the final piece.

As some news reports have pointed out, every major player in the country, while born Italian, no longer carries the green, white and red flag.

Take for example Omnitel, which was founded in 1990 by Italy's Olivetti along with Lehman Brothers, Bell Atlantic, and Telia. By the end of the 1990s, it had become of one of Europe's largest mobile operators. In 1999, Olivetti took over Telecom Italia and sold its shares in Omnitel and Infostrada, the fixed line business it controlled, to the German group Mannesmann. A couple of years later, after Telecom Italia had passed into yet another set of hands, Vodafone took over Olivetti and rebranded it Vodafone Italia. It's now the country's second-largest mobile operator.

Listening to the story of Wind Telecomunicazioni and you've be forgiven for getting a sense of déjà vu. Founded in 1997 by Enel, Italy's biggest electric utility, France Telecom and Deutsche Telekom and by 2003 the company — which in the meantime had acquired Infostrada — was entirely Italian, Enel having become its only shareholder.

However, two years later the utility sold its majority stake in the company to Weather Investments, led by the Egyptian mogul Naguib Sawiris. Wind — which is now owned by the Russian VimpleCom group — is the third-biggest mobile operator in Italy and, through the Infostrada brand, also the second-biggest fixed-line player in the country.

The third-largest fixed-line operator, Fastweb, is also under non-Italian ownership. Founded in 1999, the company became a fibre pioneer, rolling out a fibre network in the early 2000s. In 2007 Swisscom, Switzerland's incumbent telco, completed a successful friendly takeover of the company.

Finally, to complete the catalogo of Italian telcos that went abroad, there's also the less well-known Andala UMTS, set up in 1999 by Tiscali. It won a UMTS license in 2000, and in the same year Hong Kong-based telecoms group Hutchison Whampoa acquired 51 percent stake in the company (a figure it raised to 82 percent two years later) and went on to launch third-generation services in 2003 under the Three brand.

Looking at this chain of events and the €861m agreement that will allow Telefonica to widen its influence over Telecom Italia, you might well think you're reading the final chapter of a familiar story.

But is this a tale Italians should be worried about? Yes and no, according to Stefano Quintarelli, a long-time telecoms expert who won a seat in the lower house of the Parliament in the last elections as part of former prime minister Mario Monti's Scelta Civica party.

"First of all we are talking about European companies and Italy is part of the EU. Second, it is usually a good thing when you have foreign direct investments in your country," Quintarelli said.

Nationality is not the issue, he said — but compliance regulation and strategies are. "In the case of Telecom Italia the problem is not who controls it but the mechanisms through which you make sure the owner — whatever its passport is — makes the necessary investments in the network, which is a national strategic priority."

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