Why Telecom Italia wants to sell its fixed-line division – Economy

“Pronto” – when Italians answer the phone, almost 90 percent of the time they do so via a network: that of Telecom Italia (TI), the former monopolist. But things are going badly: TI has accumulated 26 billion euros in debt, and the number is constantly increasing. Now a sale to the American investor KKR is intended to save the company – the deal is expected to bring in up to 22 billion euros. And TI, according to CEO Pietro Labriola’s plan, would then concentrate on the services business. The board of directors of Telecom Italia already approved the project at the weekend.

But whether the deal actually goes through may be decided in court: the largest shareholder, the French media group Vivendi, wants to take legal action against it. Not because people are against the former state-owned company TI selling the silverware, so to speak. Vivendi believes that the landline division was given away too cheaply. According to reports from Paris, TI’s fixed business is worth not 22 billion euros or even less, but 31 billion euros. According to its offer, KKR values ​​the fixed-line division at 18.8 billion euros, including debt. However, the price could rise to 22 billion euros under certain conditions.

And Vivendi isn’t the only one who doesn’t like doing business with the Americans. Some smaller shareholders had suggested selling the domestic branch business and the sought-after Brazilian subsidiary TIM Brasil. According to a former TI manager, at least 16 billion euros could come into the coffers. The investment advisor Merlyn, which represents this group of shareholders, also reserved the right to take legal action.

The Meloni government is in favor of it

The second largest TI owner after Vivendi is the Italian state bank CDP with almost ten percent. It is also the majority shareholder in the fiber optic network operator Open Fiber. According to original plans, this was to be merged with the TI landline division. Italy under Prime Minister Giorgia Meloni sees the fiber optic network as strategically important and wants to retain control of it. The state is therefore planning a stake of 15 to 20 percent in the fixed network division. At the end of 2022, Meloni put a plan by her predecessor Mario Draghi on hold. This stipulated that CDP would completely take over the TI fixed network division and then merge with its smaller rival Open Fiber. KKR has already invested around two billion euros in Fiber Cop, TI’s broadband division.

TI has been trying to sell its landline division for months. This was preceded by years of discussion about the best way to restructure the ailing telecommunications provider. It’s not easy: after all, Italy has one of the most competitive telecommunications markets in Europe. Landline fiber optic connections are available there for around 20 euros. In mobile communications, TI’s French competitor Iliad has been making life difficult for Italian providers with competitive prices since it entered this market in 2018.

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