Telecom Italia Nearing Crossroads Decision on Network Sale

Telecom Italia SpA is nearing a decision about the sale of its landline network, a transformational deal for the former Italian phone monopoly that would be a first for a European carrier.

(Bloomberg) — Telecom Italia SpA is nearing a decision about the sale of its landline network, a transformational deal for the former Italian phone monopoly that would be a first for a European carrier. 

The sale of Telecom Italia’s most valuable asset has become more urgent in the last year amid mounting pressure to slash its €30 billion ($32 billion) in gross debt as interest rates rise. 

With new bids expected by the end of the week, the company will have to decide whether to hold out for the premium valuation its largest investor is demanding, or to accept one of the fresh offers, which will likely be significantly lower. 

KKR & Co. is expected to slightly increase its bid while Italy’s state lender Cassa Depositi e Prestiti SpA, with ally Macquarie Asset Management, will likely broadly stick with their existing offer, people familiar with the matter said. Both groups will make offers on improved synergies, the people said, asking not to be identified because the details are private. 

Read More: Italy Would Back Joint CDP, KKR Bid for Telecom Italia Grid

The previous offers, which Telecom Italia rejected, were in the €19.3 billion-to-€21 billion range, people familiar with the matter have told Bloomberg. Top shareholder Vivendi SE has repeatedly said it values the grid at around €30 billion. 

Telecom Italia’s board is divided between entering exclusive talks with one of the bidders and pulling the plug on the sale since neither offer is likely to match Vivendi’s expectations, the people said. The company will hold board meetings on June 19 and June 22 to discuss the offers, they said. 

Government Role

Italian Prime Minister Giorgia Meloni’s administration has taken an active role on the deal, but officials remain split on the best structure to guarantee public oversight over the network while also protecting thousands of jobs. Disagreements on the involvement of Cassa Depositi have caused delays, with frequent U-turns in the planning process.

Telecom Italia shares were little changed at the close in Milan on Thursday after earlier gaining as much as 2.7% following the Bloomberg report. The company has a market value of €5.4 billion. 

Halting the sale process could throw doubts on the future of Chief Executive Officer Pietro Labriola, who’s pushed for the sale for more than a year, the people said. Given the value range of the current bids, Vivendi could pivot to a takeover plan involving all of the current suitors, or opt for an alternative path, possibly involving the sale of the carrier’s Brazil unit Tim SA, the people said. 

The disposal of Telecom Italia’s landline grid remains the main option for cutting the phone carrier’s debt pile, Labriola said last month during a conference call with analysts. “Still, the sale price needs to be fair,” he said.

Vivendi Fight

Bloomberg News reported in January that Vivendi was seeking changes to Telecom Italia’s board after the French company’s CEO Arnaud De Puyfontaine resigned as a director, including replacing Chairman Salvatore Rossi.

A blow for Telecom Italia’s top management also came in April, when the phone company’s investors rejected a proposed compensation package for Labriola valued at as much as €25.8 million, after Vivendi criticized it for lack of transparency.

Representatives for Telecom Italia, Cassa Depositi, Macquarie, KKR and Vivendi all declined to comment.


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