MISP checks telco’s vital signs – as predators jostle for TIM’s backbone

Is this state support a little too late?

The Italian government in Rome is offering special energy cost breaks to telco in recognition of the infrastructure’s value to its economy. Meanwhile however the long running saga of the future of its national telecoms grid hangs in the balance, as Reuters has reported the latest in the boardroom battle over the ownership of the nation’s spine.  

Telecom TV has reported that the Italian Ministry of Enterprises and [things] Made in Italy (MISE), has mooted a €1.5bn suite of measures to support the struggling domestic telecoms sector. In a draft decree obtained by Reuters, lower levies on energy bills are being considered for companies that are of strategic importance to the state. That would give telcos, who are now being recognised as such, a three-year breathing space until 2025. Another change would see an existing tax break, which currently targets energy-intensive firms, extended to strategic telco companies.

These two measures would reportedly cost a total of €1.2bn between 2023 and 2025, subject to European Commission approval. An extra €200m investment will help operators move from copper to full-fibre fixed networks, and €145m will fund the early retirement of experienced workers in the industry, replacing them with youthful entrants. The document is subject to change and needs to be given the green light by the cabinet before it comes into effect. The new government says it recognises the competition and tight margins that have beset the nation’s comms industry, which in turn has made infrastructure upgrades financially unfeasible.

Meanwhile, the fate of Telecom Italia (TIM) hang in in the balance as a number of its directors have demanded an extraordinary board meeting to a vacant seat on their board with a candidate proposed by top investor Vivendi, according to two of Reuters’s sources on Saturday.

French media group Vivendi is currently at loggerheads with TIM’s management over its plans to revamp the nation’s top phone company by selling off the network infrastructure built with the taxes invested in the former national monopoly. On the one hand there is a national question about the country’s prized landline grid being sold off to private equity speculators. Vivendi is thought to be more concerned about the best interests of its own share values in the telecoms business.

At the start of May 2023, Vivendi warned that in his haste to slash the estimated €27.5 billion ($25 bn) debts of the company, CEO Pietro Labriola may risk underselling the physical assets and warned that this would needlessly impair the revival of the creative side of the business. Vivendi owns a 23.8% stake in TIM and recently relinquished its seats on the board. But it is anxious to steer the course of the group’s progress and wants more representation to determine the fate of the company. It is anxious to make the Italian government more empathetic to its alternative plan. Italian president Giorgia Meloni has said her administration will not intervene at this stage in the network sale process, but she is thought to be keen to avoid risking any deal that is not in the national interest.

In the latest development on Friday, an unquantified number of TIM directors are reported to have sent a letter that urged the company to call a meeting as early as this week to select Luciano Carta to fill a vacant seat on the board, the sources said.

The nomination of Carta, a former chairman at Italian defence group Leonardo, is being sponsored by Vivendi. One of the sources said Telecom Italia’s nomination committee will start a review of Carta’s candidacy on Monday, adding that no board meeting has yet been called. The board seat has been vacant since January when Vivendi chief executive Arnaud de Puyfontaine quit the board asking for a new governance set-up.

Responding to questions over future direction, TIM has set a deadline of June 9 to receive improved offers from rival bidders New York-based KKR and a consortium comprising the Italian government-owned bank Cassa Depositi e Prestiti (CDP) and Australian financier Macquarie, with both the parties having designs on the network Infrastructure grid.

In their latest bids, KKR offered €21 billion euros ($23.12 billion) and while the CDP consortium tabled a bid of €19 billion for the asset, Reuters’ reported on May 4^th. There is still a €10 billion shortfall in Vivendi’s price expectations.

TIM directors are expected to discuss the bids at an ordinary board meeting due on June 22.