Telecom Italia CEO says deals needed to cut debt mountain (updated)

Future Generation Australia

15/02/2023 12:40

(Adds details from analyst call)
    By Elvira Pollina
       MILAN, Feb 15 (Reuters) - Telecom Italia (TIM)  TLIT.MI 
needs to take one-off measures such as selling assets to cut its
debt and revamp its business, the head of the former national
phone company said on Wednesday.
    Chief Executive Pietro Labriola said TIM would not comment
on a non-binding bid from KKR  KKR.N  for its landline grid
until a board meeting scheduled for Feb. 24 to decide on the
"next steps".
    But he told analysts that TIM needed to take "extraordinary
measures" to slash its leverage beyond what it could achieve by
operational improvements. 
    Net financial debt stood at 25.4 billion euros ($27.2
billion) at the end of 2022, up by 3.2 billion euros from the
year before.
    Labriola was speaking after TIM late on Tuesday unveiled a
new set of financial targets indicating a return to growth this
year after its 2022 earnings fell less than initially feared.
    TIM shares pared initial gains and were 0.5% up by 1200 GMT
after rising over 2% during morning trade.
    Hit by a steady erosion of earnings and sales over the past
decade amid tough competition at home, TIM is seeking a
turnaround centred on a sale of its prized landline grid to
focus on its service operations.
    KKR, already a minority investor in TIM's landline grid,
this month offered to buy a controlling stake in a venture
comprising TIM's fixed network and submarine cable unit Sparkle.
    Two sources familiar with the matter said KKR values the
venture at 20 billion euros, including an earnout of some 2
billion euros.
    Labriola told analysts the company has other options to
raise cash, including a sale of of a stake in its Enterprise
business unit, comprising cloud and cybersecurity activity,
adding "but clearly the focus is on Netco now".
    TIM's second biggest investor, state lender CDP, is also
studying an offer together with Australian infrastructure fund
Macquarie  MQG.AX  for an asset over which the government has
special powers to block unwanted interest.
   Last year TIM spent months negotiating a sale of its network
to a consortium led by CDP aimed at creating a broadband
champion combining its infrastructure with that of CDP's
broadband unit Open Fiber.
        But regulation and valuations issues have thwarted those
efforts, with TIM's leading investor Vivendi  VIV.PA  seeking a
price tag of 31 billion euros to back a sale, against a 17-18
billion euros valuation by CDP, according to sources.
    
     
  
 (Reporting by Elvira Pollina
Editing by Keith Weir)
 ((elvira.pollina@thomsonreuters.com;))