By Elvira Pollina
MILAN (Reuters) -Telecom Italia (TIM) needs to take one-off measures such as selling assets to allow it to cut its debt, revamp its business and resume dividend payments, its chief executive said on Wednesday.
TIM would not comment on a non-binding bid from KKR for its landline grid until a board meeting scheduled for Feb. 24, CEO Pietro Labriola said.
Labriola stressed that TIM would assess any alternative proposals that emerge for the network, adding it expects discussions within the board over the fate of the grid to continue beyond the end of next week.
But he told analysts that TIM needed to take “extraordinary measures” to slash its leverage beyond what it could achieve by operational improvements.
Net financial debt stood at 25.4 billion euros ($27.2 billion) at the end of 2022, up by 3.2 billion euros from the year before.
The CEO was speaking after TIM late on Tuesday unveiled a new set of financial targets indicating a return to growth this year after its 2022 earnings fell less than initially feared.
Labriola, who took the helm at TIM a year ago, made clear a return to dividend payments on ordinary shares was hard to imagine in the short term.
TIM shares erased initial gains and were flat by 1400 GMT after rising over 2% during morning trade.
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Hit by a steady erosion of earnings and sales over the past decade amid tough competition at home, TIM is seeking a turnaround centred on ceding control of its prized landline grid to focus on its service operations and pursue other M&A deals.
KKR, already a minority investor in TIM’s landline grid, this month offered to buy a controlling stake in a venture called Netco comprising TIM’s fixed network and submarine cable unit Sparkle.
Two sources familiar with the matter said KKR values the venture at 20 billion euros, including an earnout of some 2 billion euros.
Labriola said TIM has other options to raise cash, including a sale of a stake in its Enterprise business unit, comprising cloud and cybersecurity activity, adding “but clearly the focus is on Netco now”.
TIM’s second biggest investor, state lender CDP, is also studying an offer together with Australian infrastructure fund Macquarie for an asset over which the government has special powers to block unwanted interest.
Last year TIM spent months negotiating a sale of its network to a consortium led by CDP aimed at creating a broadband champion combining its infrastructure with that of CDP’s broadband unit Open Fiber.
But regulation and valuations issues have thwarted those efforts, with TIM’s leading investor Vivendi seeking a price tag of 31 billion euros to back a sale, against a 17-18 billion euros valuation by CDP, according to sources.
(Reporting by Elvira PollinaEditing by Keith Weir)
