Pietro Labriola, the new CEO of Telecom Italia (TIM), set out his alternative plan to a takeover approach from private equity fund KKR on Wednesday and its share price subsequently plunged. The company’s record losses and the gloomy general outlook for 2022 were cited by Reuters as bigger factors for the confidence crisis than Labriola’s presentation.
An annual loss of €8.7 billion ($9.7 billion) forced TIM to suspend dividend payments. This is likely to have scared investors, given the heavy debt the company labours under. TIM shares fell 16 per cent to around €0.29 euros by noon, a low price that had tempted KKR to make its takeover bid in November. KKR had offered €.505 per share, which valued TIM at €10.8 billion. The size of 2021’s losses, the consequent lack of dividends and the cautious 2022-24 targets came as a surprise, said Intesa Sanpaolo analysts, explaining the share slide.
Labriola said his strategy to revamp TIM is unwaveringly set on a course of separation of its prized network operations. With the support of top investor Vivendi and state lender Cassa Depositi e Prestiti CDP,) Labriola argued that his plans for TIM reflect those outlined by KKR. The difference is that Vivendi thinks the KKR bid is too low.
“Once KKR expresses interest at that price, you realise that the real value of the company is higher,” Labriola told reporters, “If we do it internally the value generated can probably be redistributed among all shareholders, majority and minority.”
An assessment by TIM’s advisers on KKR’s approach could be finalised shortly and a board verdict is expected in mid-March, according to a Reuters source. A division of units would mean that TIM could merge its fixed network with the state backed fibre optic firm Open Fiber, a move advocated by CDP, which has a 10 per cent stake in TIM. The Italian government also owns a 60 per cent stake in Open Fiber.
KKR owns a 37.5 per cent stake in Italy’s secondary network, FiberCop after paying €1.8 billion euros last year. There has been speculation that KKR could ditch its takeover approach and settle for a strengthened role in the new TIM network business, says Reuters. Labriola said that had not been discussed with KKR.