Italian Government’s impact on the major European TLC companies has been fluctuating over the recent years. Generally speaking, the old European companies (Telecom, France Telecom, Deutsche Telekom and Telefonia) have all undergone a privatization process with different timing from other EU countries. Even today, while the major TLC operators are dealing with new technologies and services, EU States are diverging on technological progress: some of them would like to reaffirm public control over the most technologically segments of the old TLC operators; some others, instead, would opt for a limited public control and for reducing public involvement.
German Government reduces its overall stake in Deutsche Telekom
This is particularly true for Germany: few weeks ago, the German Government sold a significant number of Deutsche Telekom stocks amounting to 2.5 billion euros. The divestiture was managed by the KfW investment bank which sold 110 million stocks thus reducing Germany’s public stake from 30.46% to 27.8%. Shares have been split between the Government and the Bank, which keep being the major shareholders of the former public monopoly, which was privatize in 1995. Furthermore, the divestiture has not ruled out the chance of further reducing the public shareholding. KfW has indeed declared that it “will take advantage of good market conditions to further privatize the group.”
Spanish government to invest in Telefonia
Differently from Germany, Spain and Italy are opting for a quite different approach, acquiring again former TLC public companies. The Spanish Government has recently become the major shareholder of the former Telefonica, increasing its stake up to 10%. The acquisition has been performed by resorting to Sepi, Sociedad Publica de Participaciones Industrailes, which has acquired 2.85 billion euros to seal the return of the Spanish Government to the ownership of the Spanish company, privatized in 1997, recognizing its “importance and strategic value for the country.” Government’s decision follows the entry of Saudi Telecom Company (STC) into Telefónica capital. Last September, the Saudi company acquired 4.9% of Telefónica stocks with the option of acquiring an additional 5% through convertible financial assets. This acquisition triggered lots of different reactions and tensions in Madrid, taking both the Board of Directors and the Government by surprise. Bbva and La Caixa are also among the major Telefónica’s shareholders. Since the day the Spanish Government privatized public companies, like Endesa, Iberia or Telefónica, mostly between 80s and 90s, no other government has ever been able to put into place such a relevant revolution both from financial and strategic perspective.
French government to control Orange
More stable is the French case, where the Government holds 13.39% of Orange stocks while the remaining 6.14% is held by employees. Since France Telecom privatization, the shareholder part of the group has been fairly stable and nothing has ever undermined public control over the TCL group, which oversees strategic telecom infrastructures in France.
Italian Government to manage company’s stocks
In Italy, the situation of Telecom Italia has been rapidly changed over the years. After the privatization and the many changes concerning the management of the company (Pirelli first and Vivendi later), the Government has decided to re-enter the group’s shareholders to safeguard national interests of TLC group’s network. A core group of new shareholders is currently being created holding a significant stake in the new company (Netco) including the telecommunication networks of the Italian group. The Ministry of Economy will hold a 20% share while an additional 10% will be acquired by the F2i fund which will invest approximately 1 billion euros to take over its participation. F21 will thus be partnering with Mef to counterbalance the share managed by foreign shareholders, USA KKR fund and Abu Dhabi Investment Authority, who have acquired 70% of the group. According to the Italian minister of Economy, Giancarlo Giorgetti, “the Government is interested in taking the control over strategic measures concerning key infrastructures for the Country and for its digitalization.”
Governments are focused on strategic infrastructures but how about investments?
EU countries’ national governments aimed at keeping controlling technological infrastructures which are mostly managed by old incumbents. There is too much interest in these infrastructures and too much risk for them to being controlled by foreign investors who, most of the times, are not even politically aligned with European and Western interests. This is the main reason why major EU countries have decided not to go ahead with TLC groups’ divestiture, but they have, rather, kept managing Telcos companies considering the idea of stepping back into some groups, like for Spain and Italy. So far, however, this renewed interest in the “public” sector has not aligned with investments’ issue affecting the telecommunications industry both at the European and global levels. To keep up with technological demands, all TLC companies need substantial investments to meet ongoing connectivity updates and latest technological applications, like those involving AI. The public sector might provide companies with necessary resources to support the efforts of major telecommunications groups: as of today, this approach has not found any confirmation in Europe yet. EU countries have emphasized how important it is to “driving investments” and “encouraging stronger pan-European giants to rise and benefit from the major economies.”
This challenge must be addressed to bridge the gap with the United States, China, Japan, and South Korea. In the White Paper, recently approved by Brussel, has clearly been stated that “EU market fragmentation along national borders impacts TLC operators’ ability to achieve needed conditions to invest in future networks.” However, it is precisely through public support that Europe might be able to keep up with TLC giants, China, and U.S., which have already monopolized TLC industry. Therefore, while it’s true that EU Commission’s White Paper seems to ease mergers throughout TLC European market, it is also true that Brussels is not yet ready to adopt a similarly flexible approach towards public support to investments from the major groups.
Final thoughts
Telecommunications, specifically in their infrastructure component, are such a strategic and crucial sector for European countries and it is no surprise that several governments, like ours, have decided to re-enter this sector after its privatization in 1990s. The availability for a reliable and safe network infrastructure is considered a key element for energy efficiency and transportation industry. From this perspective, the trend that has emerged over the last years – a return to public control and legislation which safeguard national strategic interest (Golden Power) – won’t change that much. Quite the opposite, the more the people will be aware of the importance of network infrastructures, the more the Government will be interested in managing and controlling them all. This perspective is, however, in contrast with the European interest aiming to ease the development and implementation of a unique transnational technological vision. European countries might opt for it, resorting to all necessary resources to better implement network infrastructures: the process could be the same one as the one already used to boost economic growth soon after COVID-19 pandemic which is Eurobond. But a step forward in European policy is necessary.
