Telecom Italia Aims To Sell Mobile Unit TIM - Sources
MILAN -(Dow Jones)- Telecom Italia is working on a restructuring plan that includes the spin off and sale of all or a part of its mobile unit Telecom Italia Mobile, which could be worth about EUR35 billion, people familiar with the situation told Dow Jones Newswires Saturday.
The move is part of a new strategic plan to re-design Telecom Italia as a broadband media, telephony and content provider through a content deal currently being negotiated with News Corp.
Telecom Italia Chairman Marco Tronchetti Provera and News Corp's Rupert Murdoch met earlier this week in ongoing talks for a content agreement that would see News Corp supply films, entertainment and sports to Telecom Italia's broadband portal.
"On Monday, Tronchetti Provera will inform the board of his intention to spin off and sell Telecom Italia Mobile in order to concentrate on the delivery of content by broadband," said a person familiar with the plan who requested anonymity.
The board will also approve Telecom's first half results.
The person said that Telecom's advisors began contacting "several US private equity funds" in late July about a possible purchase of Telecom Italia Mobile.
Also contacted was De Agostini, a cash-rich unlisted Italian publisher that recently diversified into online gaming with the acquisition of Lottomatica.
Telecom Italia needs to do a deal for two reasons - like all telecom providers, it is suffering from new technologies such as Internet-based calling and more competition eating into the traditional fixed-line business.
In addition, the company is burdened with a net financial debt of more than EUR41 billion, a figure almost on par with its market capitalization of about EUR41.5 billion.
Tronchetti Provera has pushed a range of strategies to keep Telecom Italia competitive. By marketing a host of new services such as video home phones, he succeeded in increasing the fixed-line business at a time when revenues were sliding at other telecom firms.
In 2004, he merged Telecom Italia with Telecom Italia Mobile, touting synergies that would emerge from technologies that would allow customers to flip between mobile and fixed-line networks.
But the merger increased Telecom Italia's debt burden, and the company has had trouble delivering on its targets for group revenues.
Banca Leonardo, Rothschild and Mediobanca are advising Telecom Italia on the sale of Telecom Italia Mobile, said a person familiar with the situation.
While the timing of the sale is unclear, Tronchetti is under financial pressure to come up with the cash to maintain his majority shareholding at Olimpia, the holding company through which he controls Telecom Italia with an 18% stake.
Tronchetti Provera controls Pirelli which, in turn, owns 70.5% of Olimpia. The rest of Olimpia is owned by an unlisted holding company and two banks, Unicredito and Banca Intesa. The two banks, with a total of 9.5%, plan on exercising a put option which would require Pirelli to pick up their shares at a total cost of EUR1.1 billion this fall.
Tronchetti Provera has raised more than EUR700 million through a private placement of a stake of Pirelli's tire unit. Cash from the sale of the mobile unit would enable him to pay down debt and shore up control of Olimpia.
It's not clear now what his financial strategy is.
One of the people close familiar situation said that the new strategic re-focusing of Telecom Italia "won't affect Olimpia."
It is clear, however, that Murdoch isn't buying TIM.
"The talks are parallel," he said, referring to the sale of TIM and the content deal being negotiated with Murdoch.
-By Sabrina Cohen, Giada Zampano and Jennifer Clark, Dow Jones Newswires; 39 02 2900 4568; jennifer.clark@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 9th September 2006