2023-11-05 15:34:00
After months of intense negotiations, Telecom Italia is preparing to deliver its verdict this Sunday on the offer for its fixed network submitted by the American investment fund KKR, supported by the Meloni government but rejected by its main shareholder, Vivendi.
If the operation, which aims to reduce the Italian group’s enormous debt, is successful, Telecom Italia would become the first major operator in Europe to take the plunge and separate itself from its fixed network in its domestic market.
An offer worth more than 20 billion euros
After a first session of almost eight hours on Friday and an informal meeting on Saturday, the board of directors of Telecom Italia was to meet once more this followingnoon before making a decision. KKR has found a major ally, the Italian government, which intends to take a stake of up to 20% in the fixed network, to influence the choices of an infrastructure considered strategic.
By mid-December, the fund also plans to submit a firm offer for Sparkle, a subsidiary specializing in submarine cables, which should fall into the government’s hands. The amount of KKR’s offer for the network varies between 20 and 23 billion euros, subject to certain conditions, including around ten billion euros of debt. This proposal remains far from the expectations of the French media giant Vivendi, the largest shareholder of Telecom Italia with a share of 23.75%, which was banking on 31 billion euros.
Vivendi does not want to give up
Vivendi said it was prepared to take legal action if KKR’s offer was approved without being submitted to an extraordinary general meeting of shareholders. And for good reason: in such a meeting, decisions are taken by a two-thirds majority. The French group had also slammed the door of the operator’s board of directors in January.
Vivendi increased the pressure on Telecom Italia by asking the board of directors to examine, before any decision, an alternative plan presented by Stefano Siragusa, former deputy general director of the operator. To avoid selling the network, considered the “crown jewel” of the group, Mr. Siragusa, associated with the Merlyn investment fund, proposed the sale of the lucrative Brazilian subsidiary and the branch in charge of individual customers in Italy.
According to the two allies, who claim to represent shareholders holding less than 3% of the Italian group, TIM Brasil should bring in around 7 billion euros and the individual customer activity ” no less than 9 billion “. Merlyn’s plan also plans to replace Telecom Italia CEO Pietro Labriola with Stefano Siragusa, who had headed the Telecom Italia network before resigning from the group in August 2022.
Debt pressure
The Italian operator needs new money to face a debt which continues to grow and now stands at 26.2 billion euros. This debt prevents it from investing in the deployment of optical fiber, while Italy is far behind in this area.
According to the European Commission, fiber only covered 44% of households in Italy in 2022, compared to 63% in France and 89% in Spain. Hence the decision of the Italian government, which has special powers in sectors considered strategic, to increase its control over Telecom Italia.
Result: the Italian State is already the second shareholder of the group, through a 9.81% stake held by the Italian Caisse des Dépôts (CDP). To ensure government support, KKR has committed to taking on around half of the operator’s approximately 40,000 employees in Italy. It thus gives pledges to the government, keen to safeguard these jobs, according to a financial source. A first attempt by KKR to take control of the entirety of Telecom Italia failed in April 2022, encountering, once more, the refusal of Vivendi who considered its offer too low.
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