(Bloomberg) — Chief Executive Officer Luigi Gubitosi is preparing to relinquish control of Telecom Italia SpA’s network in a bid to revive an on-again, off-again deal with rival Open Fiber SpA and extract value from the company’s multi-billion euro network, its most valuable asset, people familiar with the matter said.
The phone carrier’s shares rose as much as 6%, the most in more than eight months, after Bloomberg reported the news.
Telecom Italia said in a statement following the report that it has not taken any decisions on its network unit.
The revised merger plan comes in the wake of pressure from the Italian government, which has warned that previous versions of the deal could return the country’s telecommunications industry to a near-monopoly, the people said, asking not to be named because the new project isn’t public.
The new version of the plan is also aimed at addressing European Commission concerns that a combination with Open Fiber could hamper competition, the people said.
The bid to satisfy authorities in Rome and Brussels envisages securing a solid streamline of revenue for Telecom Italia as well as transferring part of the carrier’s 22 billion euros ($25.4 billion) in debt and several thousand employees to the combined entity.
Gubitosi now plans for Telecom Italia to hold a minority stake in a merged entity that will pool the company’s FiberCop landline unit with that of Open Fiber, a smaller, state-backed rival, the people said.
Italy’s state-backed lender Cassa Depositi e Prestiti SpA, known as CDP, owns about 10% of Telecom Italia and controls Open Fiber.
Spokespeople for Open Fiber and Vivendi SE declined to comment. A representative for the Italian government did not have an immediate comment.
Placating Vivendi
Gubitosi last month discussed the revised deal with top government officials in Rome, laying out his vision for a single network that would avoid duplications of investments and help accelerate a national fiber roll-out, the people said.
The change in approach could also help Telecom Italia placate its biggest investor, France’s Vivendi, which has called for Gubitosi to move faster with his plan to turn the company around.
Vivendi has stepped up pressure on the Italian executive after an October profit warning, and a group of directors led by CEO Arnaud de Puyfontaine asked Telecom Italia Chairman Salvatore Rossi to convene a meeting to discuss the company’s plans on Nov. 11, people familiar with the matter said last week.
The extraordinary meeting will focus on a potential reorganization and on strategies to revive the phone carrier’s fortunes, including reviewing options for the network, the people said.
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