Shares of Telecom Italia and Pirelli were lower in heavy trade on Monday after Pirelli sold control of Italy's largest phone group to a group of Italian investors and Spain's Telefonica.
After initial gains of more than 2%, both Italian stocks lost ground. At Telecom Italia shares had slipped 0.1% to 2.26 euros, while Pirelli shares were down 0.8% at 0.92. Telefonica shares were up 0.5% at 16.63 euros.
"The shares are swinging because investors still have to figure out the impact of the news," said an analyst in Milan.
"We think Pirelli should gain in the short term from exiting the telecoms business, but the stock rose more than 3% on Friday, and the deal was expected. As for Telecom, minority shareholders lost out again, so maybe some are getting out."
Telefonica, Italian banks Mediobanca and Intesa Sanpaolo, insurer Generali and Italy's Benetton family will buy Olimpia, the holding company that owns 18% of Telecom Italia, from Pirelli, they said on Saturday.
The deal thwarts interest by Mexico's America Movil and ends months of tensions between Italy's government and Pirelli, which is bowing out after losing more than 3 billion euros ($4.08 billion) on the investment it made six years ago.
Italian premier Romano Prodi had repeatedly called for Italian financial investors to take the lead and for a European industrial partner.
U.S. phone giant AT&T, which alongside America Movil was in talks with Pirelli, pulled out citing interference from Rome.
Just as in 2001 when Pirelli took over Telecom Italia by buying a holding that had a controlling stake in Italy's largest phone group, minority shareholders are left as mere spectators.
The agreement values Telecom Italia shares held by Olimpia at 2.82 euros each, a control premium of about 25% more than the shares' closing price on Friday.