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Telecom Italia to put off decision on Hutchison talks: sources

A Telecom Italia call box is seen in a Villa Borghese park in Rome November 12, 2012. REUTERS/Alessandro Bianchi
A Telecom Italia call box is seen in a Villa Borghese park in Rome November 12, 2012. REUTERS/Alessandro Bianchi

By Stephen Jewkes and Stefano Rebaudo

MILAN (Reuters) - Telecom Italia's board is likely to put off making a decision this week on whether to open formal merger talks with Hutchison Whampoa, as key shareholders are divided on the issue, sources with knowledge of the situation said.

The board is due to meet on Wednesday to consider the latest financial results and to hear from a panel of directors that was set up last month to determine whether it should pursue a proposal to acquire Hutchison's Italian mobile business and for Hutchison to take a near 30 percent stake in Telecom Italia.

However, the panel won't be able to recommend seeking a tie-up at this stage and will instead ask for more data from Hutchison on the valuation of its 3 Italia mobile business.

Analysts reckon it could still be worth 1.5 to 2 billion euros, while a source familiar with the matter said last month that a valuation of 1.5 billion euros, was "reasonable."

"The board is inclined to further deepen the analysis (of the possible tie-up) and to ask for more details," said a source familiar with the situation.

A second source with direct knowledge of the situation said the board would look at the potential merger deal with 'prudent attention'. But it would not take any 'precipitous decision' as it still needed to overcome opposition from Spanish telecoms operator Telefonica, a top investor in Telecom Italia.

"Telefonica is vociferously against the deal," the source said without elaborating.

This source and a source close to investors said Telecom Italia's board was also unlikely to take any decision on a plan to spin off its fixed-line network, which analysts have said could be worth 12 to 15 billion euros.

The spin-off would pave the way for Italy's state-backed private equity fund Fondo Strategico Italiano to buy a significant minority stake in the future network company and possibly lead to a market listing.

Telefonica is the largest shareholder in shell company Telco, which is in turn the biggest investor in Telecom Italia with a 22.4 percent stake. The other Telco investors are Italian banks Mediobanca and Intesa Sanpaolo and insurer Generali.

While Intesa Sanpaolo has publicly said it is open to considering a deal with Hutchison sources familiar with the situation have said Mediobanca and Generali have some reservations on the proposed merger plan.

Telecom Italia and Telco's shareholders declined to comment.

(Additional reporting by Gianluca Semeraro, Danilo Masoni and Lisa Jucca in Milan and Arno Schuetze in Frankfurt; Writing by Lisa Jucca; Editing by Greg Mahlich)

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