Telecom Italia: looking for the right connections

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MILAN, Nov 9 (Businesshala) – Telecom Italia (TIM) (TLIT.MI) board members seek to reorganize Italy’s largest telecommunications conglomerate and extract value from its main network assets as top investor Vivendi (VIV.PA) Will face this Thursday on the plan. Challenges TIM CEO Luigi Gubitosi.

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Under pressure to raise cash after two profit warnings in three months, Gubitosi submitted board proposals last month to attract new investors for parts of TIM’s portfolio, including its flagship landline grid Provides broadband and fixed line services to millions of people. Italian homes and businesses.

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But the plan for the 60-year-old CEO, who secured a second term in March, received a good reception from Vivendi — the leading shareholder in the former phone monopoly ahead of state lender Casa Depositi e Prestiti (CDP).

It emerged last week that private equity firm KKR (KKRN) is eyeing further investment in TIM’s fixed-line network over the possibility of some tie-up with smaller wholesale-only fiber-optic rival OpenFibre.

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Options for TIM’s network assets will be discussed at a special board meeting on 11 November, as requested by Vivendi representatives Arnaud de Puyfontaine and Frank Cadoret, and three other independent board members.

What’s wrong with Tim?

TIM has seen a fifth reduction in revenue in the last five years due to aggressive competition from rivals such as Iliad, Vodafone (VOD.L), WindTray and Fastweb in its home market, where it has to ramp up investments to meet the growing demand for digital. need to be promoted. Services.

TIM’s 22 billion euros ($25 billion) debt, backed by its network assets, has been rated ‘junk’ by the three main credit rating agencies.

Who Calls the Shots on Tim?

Vivendi owns 24% of TIM, but does not control its board, which consists of a majority of independent directors. The CDP forms a stake of about 10% in the TIM but holds just one of the 15 seats.

What does the CDP want?

Treasury-owned CDP, which is close to becoming a controlling shareholder of OpenFiber with a 60% stake, sees the superfast fiber network as a strategic one for the country. It invested in TIM to oversee the group’s network and offset Vivendi’s influence.

Last year it backed a plan sponsored by the previous government to merge all of TIM’s network access with that of open fiber to form a single entity.

That plan, which envisaged TIM having a majority stake in the new company while giving the CDP vetting powers on strategic issues, has been stalled by opposition from key figures in Prime Minister Mario Draghi’s coalition and question marks hang over whether Brussels I’ll get past regulators sometime in it.

What does Vivendi want?

Vivendi, facing a potential 1.8 billion euro capital loss over its TIM stake at current market prices, wants more say in mapping the group’s future and questioned Gubitosi’s role after backing his reappointment in March. Is.

The CEO is trying to persuade Vivendi that giving CDP control to the network tie-up with OpenFiber is the only way to overcome regulatory and political resistance to such a plan.

Vivendi has always opposed handing over control of its most prized assets to TIM and wants a direct line with the government on strategic options for the group.

What does KKR want?

KKR last year spent 1.8 billion euros for a stake in TIM’s ‘last-mile’ Fibercop grid, which connects street cabinets to homes. It not only wants to protect that investment, but is keen to boost the exposure of TIM’s fixed-line assets as Italy prepares to spend billions of euros from the EU recovery fund to boost digital connectivity .

Sources said the possibility of the open fiber deal getting back on track has raised alarm bells and it is eyeing more investments in TIM’s network assets to strengthen its arm.

($1 = 0.8655 Euro)

Reporting by Elvira Polina, Giuseppe Fonte, Valentina Za and Stephen Jukes Editing by Keith Weir

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