Telecom Italia (TI) plans to recommend at the board’s next meeting on 7 November to abandon projects for a spinoff of its fixed-line network.
Telefonica, which recently agreed to increase its indirect stake in TI, would prefer the Italian incumbent to…
Telecom Italia (TI) plans to recommend at the board’s next meeting on 7 November to abandon projects for a spinoff of its fixed-line network.
Telefonica, which recently agreed to increase its indirect stake in TI, would prefer the Italian incumbent to retain the fixed-line network and find alternative means of improving domestic market revenues, Bloomberg reported citing people familiar with the matter.
TI announced in late May that the spinoff plan would see a newly-created company own the assets and resources for managing and developing the passive copper and fibre networks and the active components of the latter, reportedly valued at up to €14bn (US$19bn). All licensed operators would be able to access the network.
In mid-July, regulator Agcom proposed reducing the rates TI charges rivals to access its fixed-line network, prompting the company to put the spinoff plan on hold. However, then-CEO Franco Bernabe, who resigned earlier this month, later said the company would go ahead with the plan as Agcom had given it a positive preliminary assessment.
The spinoff would have helped TI cut its debt, which stood at €28.8bn (US$38.8bn) as of 30 June.
TI’s acting CEO Marco Patuano is expected to present a business turnaround plan to the board at the 7 November meeting.
Moody’s, which downgraded TI’s debt credit rating to junk status, has said a sale of the fixed-line network would not improve the company’s rating and could weaken its position in the domestic market.
Fitch, on the other hand, noted that sales of the fixed-line unit or Brazilian unit, TIM Brasil, could strengthen the balance sheet and trim debt eventually, but not in the short term given the time they would take to complete.
Meanwhile, MB Securities analyst Fabio Pavan told TelecomFinance earlier this month that a TIM Brasil sale could represent the quickest and easiest way for TI to cut debt. He noted that TIM is likely to command about €8bn – about 30% of the telco’s expected debt at year-end.
