There could not be a better warning of the risks of getting involved with Italy’s national phone company: in late February Telecom Italia said an investigation into alleged large-scale tax fraud and money-laundering involving Sparkle, its wholesale voice and broadband unit, and a rival broadband firm, Fastweb, had forced it to delay the announcement of its 2009 results by a month. The pair are thought to have become embroiled in a scam orchestrated by the Calabrian mafia. Meanwhile, discussions about Telecom Italia’s future are coming to a head, with Telefónica, Spain’s leading operator, expected to play a crucial role.

In 2007, in the aftermath of two leveraged buy-outs which left Telecom Italia with a massive burden of debt, the government arranged for the Benetton family, Telefónica and a group of local financial institutions—Mediobanca, Intesa Sanpaolo and Generali—to take control of the operator. Telecom Italia’s controlling shareholder at the time, Pirelli, had been in serious talks about selling to America’s AT&T and Mexico’s América Móvil, but the government had wanted to keep Telecom Italia in national hands.

To read this report in The Economist in full, see:
www.economist.com/business-finance/displaystory.cfm?story_id=15612237