(Bloomberg) — U.S. private equity firm KKR & Co. is considering a takeover of Telecom Italia SpA’s network unit as one of its strategic options for the former Italian phone monopoly, according to people familiar with the matter.
KKR is looking at alternatives ranging from raising its stake in Telecom Italia’s grid operations — although the carrier says it has no plan to reduce its holding — to pursuing a full takeover of the unit, said the people, who asked not to be named because the discussions aren’t public.
Shares in Telecom Italia rose as much as 9.2% in Milan. The Italian carrier has been underperforming its peers most of this year, with the stock down around 7% to date in 2021. The Europe-focused STOXX 600 Telecommunications Index has gained about 10% over the same period.
The deliberations by the New York-based buyout firm, which owns more than 37% of Telecom Italia’s FiberCop grid company, are preliminary and it hasn’t yet decided what course to take, the people said.
Telecom Italia isn’t presently contemplating a reduction of its stake in FiberCop, according to a spokesman. A representative for KKR declined to comment. A representative for the Italian government did not have an immediate comment.
KKR Infrastructure last year agreed to pay about 1.8 billion euros ($2.1 billion) for a 37.5% stake in FiberCop, which operates the portion of the Telecom Italia grid that includes cables running from street cabinets to end-user premises — the so-called secondary network.
KKR Alternative
KKR’s future plans for Telecom Italia would be an alternative to the long-discussed merger of FiberCop with its smaller, state-backed rival, Open Fiber SpA. The private equity firm may be concerned it would be diluted in a possible deal involving Open Fiber, especially after Telecom Italia Chief Executive Officer Luigi Gubitosi rejigged his project to combine with the company following strong pushback from the Italian government over antitrust concerns.
Breaking with his past position, Gubitosi is now prepared to relinquish control of the grid in a bid to revive the on-again, off-again deal with Open Fiber and extract value from his company’s multi-billion euro network — its most valuable asset — Bloomberg News reported Thursday.
Vivendi SE, Telecom Italia SpA’s largest shareholder, is reportedly disappointed with the company’s performance, and has raised the pressure on Gubitosi to act following an October profit warning.
A group of Telecom Italia directors led by Vivendi CEO Arnaud de Puyfontaine asked Chairman Salvatore Rossi to convene a meeting to discuss the company’s plans on Nov. 11, people familiar with the matter said last week.
Getting the Italian government onboard will also be essential to the success of any plans for the company. State-backed lender Cassa Depositi e Prestiti SpA owns about 10% of Telecom Italia, and Rome could invoke a so-called Golden Power ruling on a proposed deal if it’s concerned about a strategic asset potentially falling into foreign hands.
(Updates with shares in third paragraph.)
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