Reuters: Hot Stocks: UPDATE 2-Telecom Italia moves into M&A spotlight amid sector shake out

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UPDATE 2-Telecom Italia moves into M&A spotlight amid sector shake out Aug 30th 2013, 14:05 Fri Aug 30, 2013 6:28am EDT * Telecom Italia in play before year out-Bernstein * Carlos Slim could be eyeing Telecom's TIM Brazil-analyst * Telecom's controlling shareholder pact under discussion (Recasts lead, adds analyst quotes, background, shares) By Stephen Jewkes MILAN, Aug 30 (Reuters) - Shares in Telecom Italia rose sharply on market speculation it might be the next quarry in a recent upsurge in merger activity in Europe's telecoms sector. "We think that Telecom Italia is likely to be in play as a result of this round of M&A in Europe before the year is out," London broker Bernstein said in a note on Friday. Sources have said U.S. group Verizon Communications is close to buying an outstanding stake in Verizon Wireless from Vodafone Group PLC while Carlos Slim's America Movil has its eyes on Dutch telco KPN. Analysts believe America Movil wants to buy the rest of KPN to squeeze more money from Slim's great rival in Latin America, Spain's Telefonica, which wants to acquire KPN's German unit E-Plus. A Milan-based broker said Slim's next port of call could be Brazil where it has underperformed as a mobile operator. "We believe that America Movil could well make Telecom Italia an offer they can't refuse for (its Brazilian asset) TIM Brazil," said the broker, who asked not to be named. At 1017 GMT Telecom Italia shares were up 7.3 percent at 0.52 euros while the European telecom index was down 0.2 percent. Shares in the debt-laden group have been languishing near historic lows due to falling margins in Italy and a cooling in its other main market, Brazil, where it competes with Telefonica, the biggest stekeholder in Telecom Italia's core investor group Telco. Bernstein's note said the Italian government in theory viewed Telecom Italia as a strategic asset but might be willing to accept certain foreign bidders. Prime Minister Enrico Letta said earlier this month there were no plans for state holding CDP to invest in Telecom Italia. "We think Vodafone, Telefonica, AT&T/AMX and Softbank would probably all be welcome in roughly that order," Bernstein said, raising its rating on Telecom Italia to "Outperform." Telecom Italia was involved in abortive talks earlier this year with Hong Kong's Hutchison Whampoa over a possible tie-up. On Thursday an independent foundation tasked with protecting the interests of KPN shareholders moved to block Slim's 7.2 billion-euro offer for the Dutch group. Telco's investors - Telefonica, Mediobanca, Generali and Intesa Sanpaolo - have until the end of September to say if they want to exit the vehicle. Mediobanca has already said it plans to leave while Generali has said it would eventually do the same but when conditions were right. (Editing by David Cowell) Link this Share this Digg this Email Reprints

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