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Telefónica is facing political pressure in Italy over its 10% stake in the country's leading telecoms provider.



Telefónica is the largest shareholder in Telco, an Italian holding company that owns a controlling stake in Telecom Italia.



In addition, the two companies have an industrial alliance, under which the two companies are supposed to secure cost savings of €1.3bn by the end of 2010.



The Spanish company values highly its relataionship with Telecom Italia, stating “Telefónica is very happy with its position in Telecom Italia through Telco, and regards the industrial alliance [with] Telecom Italia as having been extremely positive in the past two years.”



Paolo Romani, an Italian communications minister, said last week that the nation's telecomunications infrastructure should stay under local control and that he considers Telefónica’s 42% stake in Telco to be a “relevant problem”. Italy’s prime minister, Silvio Berlusconi, has supported a similar view, saying in 2008 that Telecom Italia should not fall into foreign hands.



Telco’s shareholders, which include Italian financial institutions, will decide this month whether to extend an investor agreement which provides for Telco's existence.



Telefónica is expected to argue in favour of renewing the pact, and to face down the political opposition to its role in Italian telecommunications.



Other shareholders in Telco are Generali, Intesa Sanpaolo and Mediobanca and the Benetton family.