Shareholder Vivendi says move is positive but calls for “serious dialogue” now
Italy’s Finance Ministry has signed an MoU with US fund KKR in a preliminary deal that would see the government end up with as much as a 20% stake in Telecom Italia’s fixed-network unit. Telecom Italia in June said it had started exclusive talks with KKR for a Netco sale and gave it a 30 September deadline to submit a binding offer.
Italy will retain strategic oversight of NetCo as part of the deal, while KKR will make a €23bn binding offer by the end of next month, after two years of protracted negotiations. Netco comprises TIM’s infrastructure company FiberCop and wholesale business Sparkle.
All eyes have turned to Telecom Italia’s top investor, French media group Vivendi, which has around a 24% stake. It has been building its holding in TIM since 2015, investing more than €4 billion. Sources close to the group saw the government move as “positive news”, urging all parties to open a “serious dialogue” with it, to reach concrete and feasible solutions, a source told Reuters.
In June, Vivendi said it intended to fight against KKR’s offer for TIM’s fixed network being accepted. Vivendi’s objection is that KKR’s offer undervalues the fixed network – the company’s crown jewels – but goes deeper – with some suggesting that hiving off the fixed infrastructure will not fix TIM’s colossal €25 billion debt.
However the Italian Government’s direct intervention suggests it is sending a signal to Vivendi and others that it supports the KKR deal and wants it to proceed. According to the Financial Times [subscription], people close to the talks have said Vivendi has insisted it would not accept any offer below €30bn.
In June, when TIM’s board approved exclusive negotiations with KKR, people close to the French group also suggested Vivendi might initiate legal action to block the sale. However, Vivendi’s resistance may be moot given the FT suggests it can’t afford a spat with the government given the company is also an investor in Media for Europe, the Berlusconi family’s broadcast network – which may be sold off at some stage.
According to Reuters, Italian infrastructure fund F2I is also set to invest in NetCo, so that the combined stake in Italian hands could reach around 30%, a source with knowledge of the matter said.
TIM’s net debt of around €26bn has made selling off TIM’s fixed infrastructure a key part of CEO Pietro Labriola’s plan to reduce the debt mountain. This caused ire for long-investing Vivendi. Labriola was Vivendi’s choice for CEO and took office in late 2021, but has faced constant opposition from Vivendi ever since. The previous CEO, Luigi Gubitosi, left after Vivendi stopped him from pushing through a €33 billion offer from KKR to take TIM into private ownership.
Working hard to hit deadline
Speaking to analysts at TIM’s recent results, Labriola said “We are working hard to meet the September deadlines. Three months is barely enough for the necessary activities, but we are on schedule and do not anticipate any delays,” speaking of 9-12 months to have corporate and regulatory approvals, as reported by Veritá&Affari.
“We have indicated 9-12 months because you have to remember that today the NetCo is not yet a company. We have to carve-out, so in these times margins are foreseen to define the perimeter and comply with all Italian laws,” he added.
Labriola emphasised that any NetCo sale will not come at the detriment to the remaining ServiceCo. “We have always said that our goal is not to have a good company and a bad company, so we will not have a ServiceCo which is not sustainable from a financial and industrial point of view. This is driving our discussions.”