Italian state-controlled financing agency Cassa Depositi e Prestiti (CDP) is prepared to invest long-term in a new company that would manage Telecom Italia’s fixed-line network, chairman Franco Bassanini has said.
It would be important for Telecom…
Italian state-controlled financing agency Cassa Depositi e Prestiti (CDP) is prepared to invest long-term in a new company that would manage Telecom Italia’s fixed-line network, chairman Franco Bassanini has said.
It would be important for Telecom Italia to retain control of the network in such a scenario, Italian newspaper Il Sore 24 Ore quoted Bassanini as saying.
Telecom Italia board members decided at a board meeting earlier this month to continue talks with CDP about a potential spin-off of the network, said to be worth about €15bn. The parties have been in talks for months and Telecom Italia CEO Franco Bernabe has said he expects a final decision by year-end.
Bassanini said the parties need to strike a balance between the “vital interest” of Telecom Italia, striving to reduce a debt pile that amounted to €29.97bn at the end of September, and much-needed investment in the network.
He noted that the new company would also take control of Milan-based fibre optic network operator Metroweb, currently controlled by CDP, and other telephone networks.
Bernstein analysts said they believe an investment from CDP in the network would be “generally positive news” for Telecom Italia and its bond and shareholders, particularly if the telco retains majority control of the network.
However, senior telecoms analyst Robin Bienenstock said she does not believe Telecom Italia is keen to create a completely separate company. In her view, the telco would benefit more from a CDP investment in an incorporated entity.
“The eventual economics of a CDP investment will come down to the details of what is put into [the network company] and what is left out. From that point of view, it is reasonable to believe that Telecom Italia has the upper hand as they have huge asymmetry of information on their side.”
Bienenstock added that a rights issue and/or dividend cut could be just as good an option for shareholders, saying that TI has options whether or not it reaches the right terms with CDP.
Yesterday, Fitch affirmed CDP’s long-term issuer default rating at ‘A-‘ and short-term rating at ‘F2’. The outlook on the long-term IDR is negative. Fitch said its ratings for CDP accord with those it has assigned to Italy as a whole.
“CDP’s rating continues to reflect Fitch’s expectation of a high probability of support from the Italian government in light of the latter’s guarantee for the overwhelming majority of the issuer’s liabilities, as well as CDP’s strong integration with government policy,” the rating agency said.
Morgan Stanley, Intesa Sanpaolo, Mediobanco and Barclays are advising Telecom Italia on the possible network spin-off.
