TIM bids for selected BT Italia assets as boardroom war rages on

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Telecom Italia Group, TIM, bids for some BT contracts as the future of Italy's national infrastructure hangs in the balance.

TIM, Telecom Italia Group has only bid for BT Italia’s contracts with the country’s public sector, not any of its other assets. The negotiations are believed to be at the very early stages and TIM to be the only remaining bidder.

BT Group put the Italian business unit up for sale last summer in the aftermath of a £530 million accounting scandal in Italy. It came to light in 2016 and wiped £8 billion off the Group’s share price.

Fireworks in the boardroom

The BT bid is a sideshow compared to the bitter battle being fought between shareholders Elliott Advisors and Vivendi in Telecom Italia’s boardroom though. French media group Vivendi has demanded that five board members appointed by Elliott are dismissed, including the chairman Fulvio Conti. Vivendi (which owns 24% of the company) alleges Conti and his cohort ousted the former CEO, Amos Genish, who was appointed by the French consortium, in November last year.

Elliott is a hedge fund owned by Paul Singer and holds 8.8% of the Telecom Italia’s stock. It gained control of the board by wooing the Italian State Bank, Cassa Depositi e Prestiti, which has a 5% stake. The board has now bowed to Vivendi’s insistence on holding the shareholders annual meeting on 29 March instead of 11 April, which is likely to be a lively session with much shareholder participation.

Restructuring infrastructure?

These squabbles are in turn a sideshow considering the huge issues TIM is facing. It is one of Europe’s most indebted operators — its debts stood at €30 billion at the end of Q3 in 2018 — and it added to the pile in October, spending €2.4 billion spectrum licences for 5G.

Alongside needing to invest heavily in new network technologies, it is also grappling with digital transformation.

Against this backdrop, and to reduce debt and reduce duplicated effort and expense by the state, TIM and the regulator are supposed to be working towards hiving off its network into a separate business that would be merged with state-owned Open Fibre (which is in the process of building a wholesale broadband network nationwide). The Elliott contingent is largely in favour of this move, the Vivendi party less enthusiastic.

It’s worth noting that TDC in Denmark has already spun out its network into a separate entity and as BT narrowly avoided being forced to in the UK. With so many European operators heavily in debt, prevented from consolidating by regulators and attracting more aggressive investors, we could see more operators going the same way.