In Shadow of KKR Approach, Telecom Italia to Discuss Overhaul

Telecom Italia (TIM) directors will on Monday discuss a plan to reorganise Italy’s biggest telecoms group as newly appointed Chief Executive Pietro Labriola tries to forge an alternative to a takeover approach by U.S. fund KKR .

The debt-laden former phone monopoly is considering splitting its domestic business into an infrastructure entity and a separate service business, looking to unlock value from its assets and facilitate a long-mooted merger with state-backed rival Open Fiber.

Labriola, who previously ran TIM’s Brazilian business, is working on a standalone plan in response to the 10.8 billion euro ($12.2 billion) approach from KKR, which TIM’s top shareholder, French media company Vivendi, has said is too low.

Under Labriola’s plans, which still have to be finalised and would be presented to investors on March 3, the so-called NetCo would include the whole of Telecom Italia’s fibre and copper network infrastructure and submarine cable unit Sparkle, sources have said.

The board meeting is due to start at 1300 GMT on Monday. Sources have previously said it was unlikely TIM would take any firm stance on the KKR proposal before early March.

The network company would assume a significant part of Telecom Italia’s net debt and most of the group’s 42,500 domestic staff, sources familiar with the matter said.

The service company would focus on selling a large portfolio of products, from connectivity to cloud, to different groups such as consumers, SMEs and big corporate and public administration clients, and would include TIM’s Brazilian operations, the same sources said.