Telecom Italia board to discuss network spinoff in slow-burn KKR drama

MILAN, Feb 11 (Reuters) – The board of Telecom Italia (TIM) (TLIT.MI) will discuss the group’s overhaul on Monday as newly appointed chief executive Pietro Labriola strives to forge an alternative to a takeover proposal by U.S. fund KKR (KKR.N).

The private equity group approached Italy’s biggest telecom operator in late November but the process stalled while Telecom Italia changed its CEO, and Italy went through the process of reelecting its president.

Labriola, who previously ran TIM’s Brazilian business, is now working on a standalone plan in response to the 10.8 billion euro ($12.30 billion) bid from KKR, which TIM’s top shareholder, French media company Vivendi (VIV.PA), has said was too low.

Under pressure for years from competition at home and after a string of profit warnings last year, debt-laden TIM is considering splitting its network assets into a separate company as part of a broader revamp of its business.

That could pave the way to a long discussed merger of TIM’s infrastructure assets with those of state-owned rival Open Fiber, a move advocated by state lender CDP, TIM’s second largest investor.

Italy’s main telecom unions called on Friday for a general strike on Feb. 23 and further action in protest against the possible spin off, raising concerns about its potential fallout on jobs. read more

TIM’s future is politically sensitive because the Italian government wants to use European Union funds to improve broadband access for millions of households and businesses as part of its post-pandemic recovery.

While it waits to see if KKR formalises its bid, Italy’s Treasury would be prepared to allow the fund to play a role in the telecom’s overhaul, two people close to the matter told Reuters. Last year, KKR already invested 1.8 billion euros in a 37.5% stake in TIM’s secondary network.

MARCH MOVES

Under Labriola’s plan, which the board is expected to approve on March 2, TIM would focus on its consumer business, while enhancing its offer for corporate clients and developing cloud, Internet of things and cybersecurity businesses.

Sources have previously said it was unlikely TIM would take any firm stance on the KKR proposal before early March.

Telecoms operators across Europe are looking at ways to reinvigorate their operations, with bankers reporting talks in multiple countries as companies gear up for the roll-out of expensive new 5G services.

Britain’s Vodafone (VOD.L) said on Thursday it had rejected a preliminary approach for its Italian business from France’s Iliad and Apax Partners. That combination would have challenged TIM’s position as Italy’s largest mobile phone company. read more

($1 = 0.8782 euros)

Additional reporting by Giuseppe Fonte in Rome Writing by Keith Weir Editing by Tomasz Janowski

Source: https://www.reuters.com/business/media-telecom/telecom-italia-board-discuss-network-spinoff-slow-burn-kkr-drama-2022-02-11/