A new era is dawning for Telecom Italia (TIM). That under the aegis of Pietro Labriola, who took over at the very beginning of the year following the ousting of Luigi Gubitosi, pushed out by TIM’s main shareholder, Vivendi. On Wednesday, he submitted to the board of directors the 2021 results as well as his 2022-2024 strategic plan to counter a possible takeover by KKR. The US fund has filed a non-binding takeover offer of 10.8 billion euros to which TIM has not yet responded.
An alternative to the takeover by KKR
Pietro Labriola had announced that he was working on an alternative plan aimed at “identifying for each commercial activity the model that ensures its development in terms of innovation, profitability and value creation”. The daily “La Repubblica” and the Bloomberg agency confirm the rumors that have been agitating the transalpine telecommunications sector for weeks. A memorandum of understanding (MoU) is regarding to be signed to merge TIM’s network with that of its rival OpenFiber, under the aegis of the Italian Caisse des dépôts (CDP) – therefore the Italian State -, which holds respectively 60% and 10% of the two companies.
A division of infrastructure and services assets
Specifically, NetCo, the future infrastructure-focused company, is expected to include TIM’s fiber and copper network as well as submarine cable company Sparkle. It will benefit from the resources of the European recovery plan, of which Italy is the first beneficiary country. ServiceCo, the company dedicated to service activities, would bring together the other subsidiaries including TIM Brasil, Noovle (data storage), Olivetti (IT), Telsy (cybersecurity) and TIMvision (online film distribution). Each of the two new companies would assume a portion of TIM’s debt and equity, while creating value for all shareholders.
This project frozen for months, but never abandoned, would finally succeed with the consent of the Australian fund Macquarie, a 40% shareholder of Open Fiber. It now remains to convince the American KKR to take part in it by giving up its takeover offer.
TIM’s accounts in the red
On the eve of the board of directors convened on Wednesday, the title lost up to nearly 9% on the Milan Stock Exchange. It is now 30% lower than the offer of 0.505 euro per share filed by KKR. Analysts predict that TIM’s accounts will plunge back into the red with a 1.6% drop in revenue to 15.1 billion euros and net debt which will rise to 17.6 billion euros. The partnership forged with DAZN to win the television rebroadcast rights of the calcio for the 2021-2024 seasons has also proved to be disappointing.
The telecom operator, which is paid for its services, hopes to only receive around 200 million euros per year, far from the 340 million it expected. Pietro Labriola is thus considering selling his stake in the Inwit mobile tower group to the French investment fund Ardian. The expected gain of 1.4 billion euros will allow investments in the 5G network as well as in optical fiber.
