New government could halt recovery
Italy’s national bank may postpone its bailout and put its offer for Telecom Italia’s (TIM’s) network on ice after the election on Sept 25, according to sources at Reuters.
Cassa Depositi e Prestiti (CDP) was expected to make its bid for the network next week with preparatory work for the offer expected to be complete by the middle of September. However political uncertainty has affected the move and an election could shift the balance of power. After an internal vote it was suggested that a delay is appropriate, the source said.
Italian premier Mario Draghi’s government has spent months deliberating over the merits of a potential merging of networks belonging to former state monopolist TIM and the smaller, state-backed rival Open Fiber. The result could be a stronger backbone of pooled fibre resources and savings made by avoiding duplicated effort and investment.
The direction of electoral campaigning by competing political parties has threatened to derail the scheme. The government’s decision to go ahead with the sale of a prestigious national asset, the country’s flagship phone company, has emotional resonance for many and its perceived loss to a group of international investors has become a became a political hot potato. Giorgia Meloni, the favourite to succeed Draghi according to the latest polls, may propose a different deal once in office.
Telecom Italia’s largest investor Vivendi, which as 10% of TIM’s shares and a controlling interest in Open Fiber, has complained about a potential conflict of interest involving CDP’s role in the sale and claimed that TIM’s assets are being sold off too cheaply.
Vivendi wrote a letter to TIM stakeholders alleging that CDP chairman Giovanni Gorno Tempini should leave the board, say Reuters’ sources. TIM has scheduled a board meeting at the end of September to review Vivendi’s governance request and a number of matters of urgency, the sources said.
Speakers for Vivendi, Cassa Depositi and Telecom Italia have declined to comment on both the postponement of the offer and Vivendi’s letter.
Since his promotion to the top job in March TIM CEO Pietro Labriola has been attempting to expedite the restructure of the telco. The plan is to disaggregate the hardware (i.e. the network) and services aspects of the business. Ceding ownership of the infrastructure could cut its debt by €30 billion ($29.8 billion). The complex details of apportioning the new units and choice of partners are a matter of contention.
Labriola was originally planning to sell a controlling stake in the phone company’s grid to a group of investors led by CDP, New York based private equity firm KKR and Macquarie Group, another private equity player. In March, it appeared that KKR intended to take over TIM. By June 2022 the battle of TIM’s future had taken several turns, with rival bids being made by other fund holders. The only consistent thread has been a plan to merge with Open Fiber.
A major sticking point is TIM’s most valuable asset, the landline network, which the French company values at up to €34 billion. TIM’s advisers initially estimated it at around €20 billion. The deadline for the agreement was set for October 31.