Telecom Italia is considering a domestic spin-off of its fixed-line network as one of several strategic options for reducing debt, minimising the likelihood of having to make further dividend cuts and boosting its fibre-optic network.
The Italian…
Telecom Italia is considering a domestic spin-off of its fixed-line network as one of several strategic options for reducing debt, minimising the likelihood of having to make further dividend cuts and boosting its fibre-optic network.
The Italian telecoms operator confirmed the company would strive to raise a minimum of €4bn (US$5.34bn) from the project and may consider selling a stake in the separated network to domestic companies. The company also confirmed the project could involve state-owned holding company Cassa Depositi e Prestiti. In the meantime, Telecom Italia would develop its high-speed fibre-optic network.
Italian business daily Il Sole 24 Ore has valued Telecom Italia’s fixed-line network at up to €15bn.
TelecomFinance understands Telecom Italia executives met today to discuss its “study” of strategic options for the company and came to the conclusion that a network spin-off would not be worthwhile in the current regulatory environment.
The company declined to comment on the other options it is considering.
Reuters also quoted Telecom Italia CEO Franco Bernabe as saying “current conditions” do not permit such a spin-off.
Meanwhile, Marco Greco, an analyst for Mediobanca, a shareholder in Telco, the holding company that controls Telecom Italia, said in a report that he was surprised by talk of a network spin-off.
“[It’s] quite strange that Mr Bernabe has started considering this option when he has always said that the network is strategic to Telecom Italia and that there would be problems in refinancing the debt if [the] network is disposed,” he said.
In Greco’s view, the spin-off would have a positive short-term impact upon Telecom Italia’s stock market price.
He said that such a move could serve as a relatively “easy solution” for raising finance to pay down debt, avoid having to cut dividends and boost growth aboard.
However, he said it is hard to predict the outcome of a “trial that would be the first of its kind for an ex-incumbent”.
