Italian telecommunications company Telecom Italia is facing a crucial decision regarding its future as it struggles to tackle its €30 billion ($32 billion) gross debt. The company has to decide whether to move forward with the sale of its landline network or to call off the deal due to opposition from its top investor Vivendi SE, which values the asset higher than the offers received so far.
As the June 9 deadline for new bids approaches, it is expected that the offers from KKR & Co and Italy’s state lender, Cassa Depositi e Prestiti SpA, with ally Macquarie Asset Management, will not be significantly higher than previous rejected offers. Sources have reported that Cassa Depositi is likely to stick with its existing offer but may improve some provisions on synergies. Meanwhile, KKR is expected to slightly increase its bid while also providing some improvements on the synergy side. Prior offers ranged from €19.3 billion to €21 billion, whereas Vivendi has consistently maintained that it values the grid at approximately €30 billion.
Sources have confirmed that the Telecom Italia board has scheduled meetings on June 19 and 22 to discuss the bids. However, the board is divided between entering into exclusive talks with KKR or halting the network sale altogether since neither offer matches Vivendi’s expectations.
The Italian government is also playing an active role in the deal. While officials remain uncertain about the best structure to guarantee public oversight over the network and protect the jobs of thousands of employees, the Prime Minister's administration has remained involved in the process. However, disagreements on the involvement of Cassa Depositi have caused delays with frequent U-turns in the planning process.
Following the Bloomberg report, Telecom Italia shares rose by up to 2.7% in Milan on Thursday, giving the company a market value of €5.4 billion. A decision to halt the sale process could result in questions surrounding the future of CEO Pietro Labriola, who has been advocating for the sale for over a year. In such a scenario, Vivendi could consider a takeover plan involving all the current suitors or explore other alternatives, including selling the carrier’s Brazil unit Tim SA.