Project for demerger of Stet International approved

10/20/2000 - 00:00 PM

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Telecom Italia´s Extraordinary Shareholders´ Meeting chaired by Roberto Colaninno convened today and approved the project for the total demerger of Stet International, the group subsidiary responsible for acquiring and administrating equity interests in international telecommunication companies. Meeting also in ordinary session, the shareholders also decided to adopt a set of rules regulating shareholders´ meetings.

RATIONALIZATION OF INTERNATIONAL HOLDING STRUCTURE

The disposal of Stet International marks the first stage in the rationalization of the Telecom Italia Group´s international interests in fixed line and mobile telephony, in accordance with a plan approved last July by the executive boards of both Telecom Italia and TIM. The plan will be brought to completion with the transfer by Telecom Italia of all its interests in Stet Mobile Holding to TIM. In exchange, TIM will issue new ordinary shares to be reserved for Telecom Italia.

Upon completion of the restructuring program, TIM will be left with the entire share capital of Stet Mobile Holding (SMH), which controls the Group´s international mobile telephony interests. Telecom Italia will end up with 100% of the capital of Stet International Netherlands (SIN), which controls international both fixed-line and integrated fixed -mobile telephony interests.

Industrial logic for rationalization
The industrial and management perspective of the restructuring will be considerable. The operation will place all international fixed-line businesses under the control of Telecom Italia. Similarly, the control of mobile networks will be concentrated under TIM. The reorganization has evident advantages in terms of potential synergies and economies of scale.

Also, with respect to the industrial organization of the Telecom Italia group, the absorption of Stet International will significantly simplify the international share ownership scheme of the Group by eliminating an entire middle level of control. The simplified structure will help management concentrate on its core businesses and streamline Group structure.

The Demerger of Stet International
The operation approved today by the Telecom Italia shareholders will entail the assimilation of the entire share capital of Stet International by Telecom Italia and TIM.

At present, Stet International is 88% owned by Telecom Italia and 12% by TIM. Telecom Italia holds 83.55% of SIN, while Stet International holds the remaining 16.45%. SMH shares are divided between TIM (49%), Stet International (31.38%) and Telecom Italia (19.62%).

The non-proportional demerger of Stet International SpA will entail the passage to TIM of an amount of Stet Mobile Holding (SMH) stock that is equivalent in value to 12% of the total capital of Stet International. Telecom Italia, meanwhile, will receive the remaining SMH stock in addition to all the stock in Stet International Netherlands (SIN) currently owned by Stet International, and will be left with shares whose value is equivalent to Telecom Italia´s current stake in Stet International (88%). So, the result of the demerging operation will be to increase Telecom Italia interests in SIN to 100% and its interests in SMH to 44.96%; and to increase TIM interests in SMH to 55.04%.

To establish the financial value of Stet International and the value of the stakes held by Telecom Italia and TIM, the interested parties sought independent external advice. Telecom Italia retained Chase Manhattan as its adviser, and TIM retained Merrill Lynch. On the basis of the evaluations made by these advisers, which the boards of the three companies involved in the operation fully approved, the value of SIN was put at € 10,673 million, the value of SMH at €9,200 million and at the value of Stet International at €4,631 million.

The rationalization of the international activities of the Telecom Italia Group will be completed through the transfer of Stet Mobile Holding shares from Telecom Italia to TIM in exchange for an issue of new TIM ordinary shares reserved for Telecom Italia. TIM´s Extraordinary Shareholders´ Meeting will be held on October 24 in order to approve the operation and the capital increase.

As a result of this transfer of equity, Telecom Italia will acquire up to 353,821,259 TIM´s ordinary shares, thereby increasing its stake in TIM ordinary share capital from 60.97% to 62.94%. In exchange, Telecom Italia will transfer to TIM 1,790,089 SMH shares, equal to 44.96% of the share capital. Once the equity transfer has been completed, TIM will control 100% of the share capital of SMH.

The operation is expected to be brought to completion by the end of the year.