Telecom Italia suffers heavy losses amid uncertainty over the sale of its network

2023-05-11 16:11:00

The quarters pass, and the way of the cross of Telecom Italia continues. This Wednesday, May 10, the incumbent transalpine operator unveiled its results for the first quarter of 2023. And once once more, these disappointed the markets. Witness the title which, this Thursday, May 11, lost 2.31% to 27 euro cents at the end of the followingnoon on the Milan Stock Exchange. This time, investors have visibly punished losses much higher than expected by analysts.

Telecom Italia: the takeover of the fixed network remains the “main option” for its CEO

These tripled to 689 million euros in the first quarter compared to the same period last year. Opposite, the consensus of analysts compiled by Factset expected a loss of 191 million euros. This result is explained, according to the operator’s management, by the high costs linked to job cuts. Telecom Italia has scheduled some 2,000 voluntary departures in 2023.

Telecom Italia: the State, via the Caisse des dépôts, wants to take control of the network

Sales are growing

The operator nevertheless saw its sales increase by 5.6% to 3.84 billion euros. This increase in turnover is notably driven by TIM Brasil, its operator in Brazil, whose “development is accelerating”underlines the group in a press release.

Besides these results, all observers are waiting to know if Telecom Italia will be able to sell its fixed Internet network. And above all at what price. This file is the priority of the CEO of the group, Pietro Labriola, who is counting on this operation to better value this asset, reduce the high debt of the group (which exceeded 25 billion euros), and relaunch it, finally, following years of descent into hell.

Towards a joint offer by CDP and KKR?

But nothing says, today, that the leader will achieve his ends. Two players are interested in Telecom Italia’s fixed Internet network. These are the Italian Deposit Office (CDP) and the American fund KKR. They respectively proposed 19.3 and 21 billion euros for this asset. But these amounts are considered very insufficient by Vivendi, the French media giant, and the largest shareholder of Telecom Italia at 23.75%.

Telecom Italia fixed network: KKR and the Italian Caisse des dépôts have each upgraded their offer

The group led by Vincent Bolloré wanted, moreover, to put an end to the negotiations. He estimated that the offers were much lower than the value of the network, which he estimates at 31 billion euros. Pietro Labriola nevertheless still believes in it. This is why the leader relaunched, on Wednesday, the CDP and KKR, asking them, once once more, to revise their offers. At the same time, the Italian government, which is following the case closely – and wants to keep the Telecom Italia network, considered strategic, in its lap – has suggested another option. Rome has indicated that it would support a joint offer from CDP and KKR, which would naturally be higher than their individual offers.

The project of a large fiber network

For CDP, as for KKR, investing in the Telecom Italia network makes sense. CDP, which is the operator’s second largest shareholder with 9.8%, also owns 60% of Open Fiber, which has a competing fiber network. A long-discussed scenario would be to merge the latter with that of the incumbent operator to build a large and unique fiber network on a national scale. This operation would in fine, to accelerate the deployment of this technology, crucial for the digitalization of Italy. KKR, for its part, already has a 37.5% stake in FiberCop, a subsidiary of Telecom Italia which includes its so-called “secondary” network, linking street cabinets to homes.