Telecom Italia may be the next quarry in a recent upsurge in deal-making in Europe's telecoms industry.
Analysts at brokerage Bernstein said a lowly valuation, an attractive business in Brazil and a willingness among some Telecom Italia shareholders to sell could make the company a takeover target before the year is out.
They tipped Vodafone, Telefonica Softbank , and AT&T – possibly in combination with Mexican billionaire Carlos Slim's America Movil – as potential bidders and said the shares could double from current levels.
At 1.30pm today, Telecom Italia shares were up 9.6 per cent, the biggest rise by a European blue-chip stock, after touching a one-month high earlier. The company was not immediately available to comment on the speculation.
The telecoms sector has seen a surge in dealmaking as companies look to take advantage of low interest rates, and as European players battle to cope in a saturated market with recession-hit consumers and expensive network upgrades.
US group Verizon Communications is close to buying an outstanding stake in Verizon Wireless from Vodafone Group for potentially $130bn (£84bn), sources close to the matter have said, while a report said AT&T would examine Vodafone's remaining assets.
Spain's Telefonica has agreed a deal to buy German mobile operator E-Plus from KPN, while Carlos Slim's America Movil (AMX) threatened to abandon a plan to buy the rest of KPN today after the Dutch group's foundation said it might block a deal. A Milan-based broker said Slim's next port of call could be Brazil, via Telecom Italia.
"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.
Shares in debt-laden Telecom Italia have been languishing near historic lows due to falling margins in Italy and a slowdown in Brazil, its other main market.
"Telecom Italia is the cheapest of stocks we cover,” the Bernstein analysts said, referring to other firms with leading positions in their home markets.
They 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, adding that Telefonica – the biggest stakeholder in Telecom Italia's core investor group Telco – and a combination of AT&T and America Movil (AMX) were the most likely suitors.
Telecom Italia was involved in abortive talks earlier this year with Hong Kong's Hutchison Whampoa over a possible tie-up.