New networking company begins with €10bn debt
Telecom Italia (TIM) plans to shift 21,000 workers, nearly half of its 42,500 staff in Italy, into a network company that it intends to create as part of its restructuring plan, according to Reuters. Two Reuters’ sources close to TIM say a networking company will be made up TIM’s domestic fixed access network and international submarine cable unit Sparkle. As of March 31, TIM’s net debt was €23 billion and the ‘netco’ would be lumbered with at least €10 billion of the debt held by Italy’s biggest telecoms group. Funds accrued from a potential network deal with Open Fiber will help trim TIM’s debt below 10 billion euros, one of the Reuters’ sources said.
Open Fiber boost
In June, at an economic event in Trento, CEO Pietro Labriola outlined his long term plan to split TIM’s landline network from its service operations to maximise asset value for all shareholders and cut its debt. Italy’s former phone monopolist is restructuring its business by isolating its domestic fixed network assets to focus on consumer and commercial activities. While TIM’s network assets are to be combined with those of state-backed broadband rival Open Fiber to create a single national network company majority-owned by Italian national development bank Cassa Depositi e Prestiti (CDP).
Other options?
The new network entity would write off a significant portion of TIM’s debt and domestic staff. TIM’s top investor, French media giant Vivendi said it would be ready to evaluate other opportunities if the network value is not recognised in the single broadband plan. Its support is crucial in getting any proposal approved by the board. “The most important thing is to maximise the value of all assets in the interest of all shareholders,” said TIM CEO Pietro Labriola.
KKR interest
Italy’s Innovation Minister Vittorio Colao said the government was keen to create a national wholesale network champion independent from any broadband service provider and wanted to expedite the rollout, of fibre by removing. The success of such a plan will depend on “goodwill of foreign investors”, including Vivendi, and infrastructure funds holding minority stakes in Open Fiber and TIM’s grid, said Colao. Private equity stakeholder KKR has joined the TIM-CDP project after TIM rejected it €10.8 billion proposal to gain control of TIM and delist it before splitting its fixed and services assets.
Critical issue
The critical issue is that any combination of TIM’s network assets with those of Open Fiber would need to win regulatory approval as it would recreate a near monopoly. But in this caste meeting the competition criteria might put a spanner in the words for no reason, said Colao, a former Vodafone boss: “Ideally, we would love to have infrastructural competition, but at this stage Italy seems not able to afford it,” said Colao.