In a move that could have long-lasting
ramifications for Europe’s card processing industry, MasterCard is
believed to be linking up with Telecom Italia to bid for Italian
payment processor SIA-SSB, which was put up for sale by its
consortium of Italian bank owners in mid-2008. After a drawn-out
tender process, which attracted around 30 separate bids, SIA-SSB is
believed to have narrowed the shortlist down to two, Telecom
Italia, which already holds a 4.1 percent stake in SIA-SSB, and
European IT company Atos Origin.

Telecom Italia, looking to increase its stake in the payment
processor to 63 percent, is rumoured to be the front-runner,
according to payment industry insiders speaking to CI,
firstly because SIA-SSB may give preference to another Italian
organisation, and secondly because Atos Origin has been weakened by
in-fighting between its shareholders and board of directors over
the company’s direction.

The bidding process for SIA-SSB has been
derailed by a string of setbacks, with several early bidders
dropping out, and negotiations over the sale price dragging on as
the global economic turbulence slashes company valuations.
SIA-SSB’s initial asking price of €800 million ($1 billion) is now
believed to have fallen to around €500 million, and with no closing
date for the bidding process in sight, SIA-SSB’s sale value could
fall further.

Ramifications for processing
landscape

However, it is MasterCard’s
involvement with Telecom Italia’s bid that has the potential to
shake up Europe’s processing industry, now that the SEPA initiative
has brought about the unbundling of schemes and processing.
SIA-SSB shareholders and their equity stakes

MasterCard has made no secret of the
fact that it wants to be a fully-fledged processor, and its
potential acquisition of SIA-SSB comes just a couple of months
after MasterCard acquired Ireland-based payment solution software
provider Orbiscom for $100 million to enhance its payments
processing system.

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By GlobalData

Aside from card processing, SIA-SSB also has
network service management, capital markets and automated clearing
house (ACH) processing business lines, and it is the potential of
combining elements of those operations that appeals to
MasterCard.

Speaking to CI, Francesco Burelli, a
payment industry analyst, said: “The potential convergence of ACH,
real time gross settlement [RTGS] and cards infrastructure has been
one of the possible developments that have been explored by schemes
and processors for quite few years, revived by the SEPA
migrations.

“The topic was high on the agenda up to a
couple of years ago as it might have enabled a much higher leverage
of volume economies though a clearing infrastructure.

“We have seen technological developments
leading to convergence of ACH and RTGS functionalities but not
between these and card processing infrastructures to date and these
arguments seem to have recently lost momentum. Should MasterCard be
involved in the acquisition of SIA-SSB together with Telecom
Italia, as it is rumoured, it is likely the convergence of cards
and non-cards processing infrastructures might re-emerge.

“Should MasterCard be actually involved in the
SIA-SSB deal, there would be some interesting changes in the scheme
and card processing competitive scenarios. On one side MasterCard
would be in position of leveraging a much wider processing presence
in the issuing and acquiring value chains compared to its
competitors, while at the same time it would become a direct
competitor to processors like TSYS and First Data.”