(Bloomberg) — Telecom Italia SpA named General Manager Pietro Labriola as its new chief executive officer, throwing up a fresh hurdle to a 10.8 billion-euro ($12.2 billion) takeover bid by KKR & Co.
The carrier’s board voted unanimously to elevate Labriola at a meeting Friday, with the backing of its two largest investors — French media conglomerate Vivendi SE and Italian state lender Cassa Depositi e Prestiti SpA — people familiar with the matter said.
The backing of the state lender for Labriola and his new business plan could make it harder for KKR to succeed with its bid, which is still pending, the people said.
The carrier confirmed the appointment after an earlier report by Bloomberg News, which first reported on the expected move last month. A spokesman for Telecom Italia declined to comment further.
“My goal is to drive the group to realize its full potential and maximize the value of our assets in the interest of all our shareholders,” Labriola said in the statement. “The challenges and opportunities ahead will require cohesion among all stakeholders.”
Labriola will also keep the general manager role, while Chairman Salvatore Rossi will retain responsibility over communications on the “indicative and non-binding expression of interest sent by KKR,” the statement said.
Telecom Italia shares declined 1.1% in Milan on Friday, giving the company a market value of 8.9 billion euros.
New York-based KKR in December said its approach was “of a friendly nature,” signaling a reluctance to proceed without a green light from the Italian government and from the Telecom Italia board. Vivendi has dug in its heels against the bid, saying it doesn’t adequately reflect Telecom Italia’s value.
KKR already owns part of Telecom Italia’s landline grid as it holds a 37.5% stake in the phone carrier’s Fibercop unit.
Wrench in Plans
The political situation in Italy could also throw a wrench into KKR’s plans, with the country set to kick off the secretive voting process to select a new president on Monday. While there are no official candidates, current Prime Minister Mario Draghi, who has signaled he’s not opposed to the U.S. private equity group’s bid, is widely seen as the top contender.
But uncertainty linked to the voting process and the possibility of instability if Draghi is no longer premier have dampened enthusiasm for corporate deals in the country, affecting the KKR bid as well, people familiar with the matter said.
For his part, Labriola is championing a plan to spin off the carrier’s landline network into a new unit called NetCo that will focus on wholesale services, with the goal of gaining a solid revenue stream from regulated tariffs, people familiar with the matter said earlier this week.
A significant portion of Telecom Italia’s 30 billion euros in debt may be transferred to this new company, as could thousands of workers, the people said, and the plan could also see all of the company’s commercial services spun off into a separate unit called ServiceCo.
Labriola’s new plan would effectively revive a project to merge Telecom Italia with smaller, state-backed rival Open Fiber SpA and build a single national network to avoid billions of euros in duplicate investments, people familiar with the matter told Bloomberg on Thursday.
The 54-year-old Labriola was appointed general manager in November after former CEO Luigi Gubitosi quit. A telecommunications veteran, Labriola has been at Telecom Italia for about two decades. As head of the company’s landline services for enterprises, he was involved in one of the company’s first attempts to spin off its grid in 2013. He is also known as the creator of one of Italy’s first ADSL-based mass market services, known as Alice.
(Updates with company’s confirmation from first paragraph)
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