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MILAN, Nov 9 (Reuters) - Telecom Italia (TIM)
board members will face off this Thursday over plans to
reorganise Italy's biggest telecoms group and extract value from
its main network assets as top investor Vivendi
challenges TIM CEO Luigi Gubitosi.
Under pressure to raise cash after two profit warnings in
three months, Gubitosi last month presented the board proposals
to carve out assets and attract new investors for parts of TIM's
portfolio, including its key landline grid that supplies
broadband and fixed-line services to millions of Italian homes
and businesses.
But the plan from the 60-year old CEO, who secured a
second-term in March, got a cool reception from Vivendi
-- leading shareholder in the former phone monopoly ahead of
state lender Cassa Depositi e Prestiti (CDP).
Last week it emerged private equity firm KKR is
eyeing further investment in TIM's fixed-line network on the
prospect of some kind of tie-up with smaller wholesale-only
fibre-optic rival Open Fiber.
Options for TIM's network assets will be discussed at a
special board meeting on Nov. 11 as requested by Vivendi
representatives Arnaud De Puyfontaine and Frank Cadoret and
three other independent board members.
WHAT AILS TIM?
TIM has seen revenue shrink by a fifth over the past five
years due to aggressive competition from rivals such as Iliad
, Vodafone, Wind Tre and Fastweb on its home
market where it needs to boost investments to meet increasing
demand for digital services.
TIM's 22 billion euro ($25 billion) debt, supported by its
network asset, is rated 'junk' by the three main credit rating
agencies.
WHO CALLS THE SHOTS AT TIM?
Vivendi holds 24% of TIM but does not control its board
which has a majority of independent directors. CDP has built a
stake of almost 10% in TIM but holds just one seat out of 15.
WHAT DOES CDP WANT?
Treasury-owned CDP, which is close to becoming Open Fiber's
controlling shareholder with a 60% stake, sees superfast fibre
networks as strategic for the country. It invested in TIM to
oversee the group's network and offset Vivendi's influence.
Last year it backed a plan sponsored by the previous
government to create a single entity combining all TIM's network
access with Open Fiber.
That plan, which envisaged TIM keeping a majority stake in
the new company while giving CDP vetting powers on strategic
issues, has stalled with key figures in Prime Minister Mario
Draghi's coalition opposing it and question marks hanging over
whether it would ever get past regulators in Brussels.
WHAT DOES VIVENDI WANT?
Vivendi, facing a potential 1.8 billion euro capital loss on
its TIM stake at current market prices, wants to have more of a
say in mapping the group's future and has called into question
Gubitosi's role after backing his reappointment in March.
The CEO has been trying to persuade Vivendi that giving CDP
control in a network tie-up with Open Fiber is the only way to
overcome regulatory and political resistance to such a plan.
Vivendi has always opposed TIM handing over control of its
most-prized asset and wants a direct line with the government
over strategic options for the group.
WHAT DOES KKR WANT?
KKR last year spent 1.8 billion euros for a stake in TIM's
'last-mile' FiberCop grid linking street cabinets to homes. It
not only wants to protect that investment but is keen to boost
exposure to TIM's fixed-line assets as Italy prepares to spend
billions of euros of European Union recovery funds to boost
digital connectivity.
The prospect of an Open Fiber deal regaining traction has
set alarm bells ringing and it is eyeing a further investment in
TIM's network assets to strengthen its hand, sources have said.
($1 = 0.8655 euros)
(Reporting by Elvira Pollina, Giuseppe Fonte, Valentina Za and
Stephen Jewkes
Editing by Keith Weir)
