Spain's Telefonica, in concert with a group of Italian bankers, will buy an 18% stake in Telecom Italia. This will make Telefonica the largest shareholder of the company.

The deal is estimated to be over $5.5 billion (US). Telefonica is known as Europe's second-largest phone company.

The agreement was struck when AT&T announced it would not move forward in its talks with Olimpia, which is Telecom Italia's parent company. AT&T cited regulatory reasons for this move.

Telefonica SA and a group of Italian investors agreed to acquire 18% stake in Telecom Italia SpA for EUR 4.1 billion (US$5.6 billion).

The deal comes following the U.S. telecom company AT&T abandoned talks to buy a controlling stake of Olimpia with its Mexican affiliate America Movil, citing regulatory concerns.

(Continue reading this story on Trading Markets)

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