(Bloomberg) — Telecom Italia SpA, the carrier targeted in November by KKR & Co., confirmed it’s exploring strategic options for its network in a move aimed to extract value from the company’s most valuable asset.
The former phone monopolist’s board of directors gave Chief Executive Officer Pietro Labriola a mandate “to maximize shareholder value, with specific reference to the group’s infrastructure assets, including solutions that go beyond vertical integration,” the company said in a statement late Wednesday.
The plan is aimed at spinning off the carrier’s landline network into a new unit focused on wholesale services, with the goal of gaining a solid revenue stream from regulated tariffs, people familiar with the matter said earlier this month. The plan could also see all of the company’s commercial services spun off into a separate unit, they added.
Labriola also unveiled a project to turn around the company’s consumer segment services and boost enterprise offerings such as cloud and cybersecurity services, the statement said.
Read more: Telecom Italia names Labriola as CEO in hurdle for KKR
Telecom Italia’s board also said the phone carrier’s committee and advisors are still reviewing KKR’s non-binding offer and comparing it with the group’s in house-plan, they added.
Late last year KKR made a 10.8 billion euros ($12.1 billion) preliminary bid for Telecom Italia, an offer that’s still pending. 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 Telecom Italia’s board. The French media-conglomerate Vivendi SE, Telecom Italia’s largest investor, said KKR offer is too low and it doesn’t reflect the value of the company.
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 earlier this week. 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, was seen as the top contender.
Telecom Italia received late last year a preliminary bid of 50.5 euro cents a share from KKR. The private equity firm is debating whether it may need to eventually increase its offer to around 70 to 80 cents a share to seal a deal, people familiar with the matter told Bloomberg in November.
Telecom Italia is grappling with declining profits in its home market, where the 2018 entrance of France’s Iliad SA sparked a price war. Telecom Italia has issued three profit warnings since July, most recently citing lower revenue from services partly linked to a soccer TV deal with DAZN Group Ltd.
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