(Adds details on banks' put options, Holinvest)
By Stefano Rebaudo
MILAN, Nov 14 (Reuters) - Pirelli-led holding company Olimpia has no plans to raise its stake in Telecom Italia above 17 percent, Pirelli and Telecom Italia Chairman Marco Tronchetti Provera said on Friday.
Olimpia -- 50.4 percent owned by Pirelli and whose investors include the Benetton family and financier Emilio Gnutti -- raised 700 million euros ($824.5 million) in a capital increase on Thursday to buy Telecom Italia shares and lift its controlling stake to 17 percent from 14.2 percent.
"We have bought this latest stake because we believe in the company and we're happy with 17 percent... We have no plans to increase our stake in Telecom Italia again," Tronchetti Provera told analysts on a conference call.
Olimpia has been working for weeks to strengthen its grip over Italy's dominant phone group after it was diluted heavily in the recent merger of Telecom Italia with parent Olivetti.
In October, Olimpia sold bonds to buy Telecom Italia shares and take its stake up to 14.2 percent from 11.5 percent.
"We were happy with our stake before that but converted (the bonds into shares) because the price was right," Tronchetti Provera said.
He put together Olimpia in 2001 for a takeover raid on Olivetti. By getting more dividends from Telecom Italia with its larger stake, loss-making Olimpia will now be able to cover the costs of debts taken out for the Olivetti deal, analysts say.
Tronchetti Provera said during the conference call that banks UniCredito and Banca Intesa , which each own 8.4 percent of Olimpia, would be entitled to sell their new, shares in the holding company under the same put options they possess to sell their stakes in Olimpia to Pirelli from 2006.
Olimpia's shareholders agreed on Thursday they could raise another 70 million euros in a second tranche of the capital increase by January 7, 2004.
That money would be used by Olimpia for its share of a separate capital increase at Holinvest, another holding company which is 20 percent owned by Olimpia with the rest held by financier Gnutti's investment vehicle Hopa.
Holinvest in turn owns one percent of Telecom Italia's shares plus financial instruments convertible into the equivalent of two percent of the phone company's stock.
Analysts often add those interests to Olimpia's direct stake in Telecom Italia when calculating the influence of the holding company over the telecoms operator.
Tronchetti Provera also said Pirelli's net debt should rise to about 1.9 billion euros this year, up from 1.5 billion at the end of September, because it paid around 400 million euros towards Olimpia's capital increase.
In 2004, Pirelli's net debt should fall by about 200 million euros thanks to better operating profit and cost cuts, he added.