Telecom Italia: in search of the right connections

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MILAN: Telecom Italia (TIM) board members will face off this Thursday over plans to reorganize Italy’s largest telecommunications group and enhance its core network assets as top investor Vivendi challenges CEO by TIM, Luigi Gubitosi.

Under pressure to raise funds after two profit warnings in three months, Gubitosi last month presented the board’s proposals to carve out assets and attract new investors for parts of TIM’s portfolio, including its fixed-line telephone network that provides broadband and fixed-line services to millions of Italian houses and businesses.

But the 60-year-old CEO’s plan, who won a second term in March, received a cold reception from Vivendi, the largest shareholder in the former telephone monopoly ahead of state lender Cassa Depositi e Prestiti (CDP).

Last week, it emerged that private equity firm KKR was considering further investments in TIM’s fixed network with the prospect of some sort of tie-up with Open Fiber, a smaller fiber-optic competitor.

The options for TIM’s network assets will be discussed at a special board meeting on November 11, at the request of Vivendi representatives Arnaud De Puyfontaine and Frank Cadoret and three other independent members of the board. .

WHAT IS GROS TIM?

TIM has seen its revenues fall by a fifth over the past five years due to aggressive competition from competitors such as Iliad, Vodafone, Wind Tre and Fastweb in its home market, where it needs to increase its investments to meet the demand. growing demand for digital services.

TIM’s 22 billion euro (US $ 25 billion) debt, supported by its network assets, is rated “junk” by the three major rating agencies.

WHO CALLS THE SHOTS AT TIM?

Vivendi owns 24% of TIM but does not control its board of directors, which has a majority of independent directors. CDP has acquired an almost 10% stake in TIM but only holds one seat in 15.

WHAT DOES CDP WANT?

CDP, owned by the Treasury, which is on the verge of becoming the majority shareholder of Open Fiber with a 60% stake, considers ultra-fast fiber networks to be strategic for the country. She invested in TIM to animate the group’s network and counterbalance the influence of Vivendi.

Last year, he backed a plan sponsored by the previous government to create a single entity combining all network access from TIM with Open Fiber.

This plan, which called for TIM to retain a majority stake in the new company while giving the CDP supervisory powers over strategic issues, has stalled with key figures from Prime Minister Mario Draghi’s coalition opposing it. and question marks weigh on its ability to overtake regulators in Brussels. .

WHAT VIVENDI WANTS?

Vivendi, faced with a potential capital loss of 1.8 billion euros on its stake in TIM at current market prices, wishes to have more of a say in the mapping of the group’s future and questioned the Gubitosi’s role after supporting his renewal in March. The CEO tried to persuade Vivendi that giving control of the CDP in a network with Open Fiber is the only way to overcome regulatory and political resistance to such a plan.

Vivendi has always opposed the sale by TIM of control of its most prized asset and wants a direct line with the government on the group’s strategic options.

WHAT KKR WANTS?

Last year, KKR spent € 1.8 billion on a stake in TIM’s last mile FiberCop network connecting street cabinets to homes. He not only wants to protect this investment, but also wants to increase his exposure to TIM’s fixed-line assets as Italy prepares to spend billions of euros in European Union stimulus funds to boost digital connectivity.

The prospect of an Open Fiber deal gaining traction has sounded the alarm and it is considering further investment in TIM’s network assets to strengthen its position, sources said.


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