Italian TIM aims to maximize value and reduce debt upon dissolution

Pietro Labriola, CEO of Telecom Italia (TIM), poses for a portrait at the company’s headquarters in Rome, Italy January 17, 2022. REUTERS/Guglielmo Mangiapane/File Photo

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  • TIM and state lender CDP in talks over single fiber network project
  • CDP aims to take control of the combined entity
  • TIM CEO expects deal to close in 12-18 months
  • Success of single network plan depends on foreign investors – minister

TRENTO, Italy, June 5 (Reuters) – Telecom Italia (TIM) (TLIT.MI) will pursue a plan to separate its fixed network from its service business to maximize asset value for all shareholders and reduce its leverage , said the head of the company said on Sunday.

Under pressure for years in its highly competitive domestic market, the former Italian telephone monopoly is seeking to reorganize its business through a separation of its domestic fixed network assets to focus on consumer and commercial activities.

In a preliminary pact sealed with Italian state lender CDP last week, TIM’s network assets would be combined with those of state-backed broadband rival Open Fiber to create a single network company. national company majority-owned by CDP. Read more

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The new network entity would absorb a significant portion of TIM’s debt and domestic staff.

But TIM’s main investor Vivendi (VIV.PA), whose backing is critical to any deal, said it would be ready to assess other opportunities if the network’s value is not recognized in the single broadband plan. Read more

“The most important thing is to maximize the value of all assets for the benefit of all shareholders,” Telecom CEO Pietro Labriola said in response to a question about whether the French media giant’s position could hamper the project. .

CDP, which is TIM’s second largest investor with a 10% stake, also owns 60% of Open Fiber.

Speaking at an economic event in Trento, northern Italy, Labriola declined to say whether TIM was considering a full exit from its fixed network business with an outright sale.

He pointed out that any split would be designed to reduce TIM’s 23 billion euro ($25 billion) net debt.

“It seems to me that all parties (involved in the single network project) are interested in understanding fairly quickly whether the plan is feasible,” Labriola said, adding that the creation of a single fiber network could be completed in 12 at 18 months.

THREE-YEAR PLAN

A veteran of the telecoms sector, Labriola, who took over the reins of the company in January, is due to present a three-year business plan on July 7 focusing on the break-up of TIM’s activities.

Rome wants to create a national wholesale network champion independent of any broadband service provider, seen as a way to accelerate the deployment of fiber, avoid costly duplication of investments and contribute to the digitalization of the economy .

The success of such a plan will depend on the “goodwill of foreign investors”, including Vivendi, and infrastructure funds holding minority stakes in Open Fiber and the TIM network, the Italian Minister of Innovation acknowledged on Sunday, Vittorio Colão.

KKR (KKR.N) joined the TIM-CDP project after TIM rejected a 10.8 billion euro proposal from the US fund to take control of TIM and delist it before splitting its assets landlines and services.

But sources said he still had reservations about the deal. Read more

Basically, any combination of TIM’s network assets with those of Open Fiber would have to get regulatory approval because it would recreate a virtual monopoly.

“Ideally we would like to have infrastructural competition, but at this stage Italy does not seem able to afford it,” said Colao, a former boss of Vodafone (VOD.L), speaking during the same event in Trento.

($1 = 0.9330 euros)

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Reporting by Francesca Landini and Elvira Pollina; Editing by Jane Merriman and David Holmes

Our standards: The Thomson Reuters Trust Principles.

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