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Tim will sell the network so as not to explode the debt bomb

5 months ago babelfish

Tim will sell the network so as not to explode the debt bomb

What Tim's company boss, Labriola, said. The scenario with Kkr. And the stormy relations with Vivendi. Here's the latest news on Tim

Tim forced to sell the NetCo network to Kkr under the burden of debt.

Last November 5, Tim's board of directors approved the sale of the network to the American fund without making it subject to a shareholder vote. The decision was taken despite the opposition of the largest shareholder, the French company Vivendi, which announced that it "will use every legal instrument" at its disposal against the board of directors' decision. Even if the real objective of the transalpine group is to exit Tim without losing a lot of money given the emerging capital loss compared to the initial investment.

But the sale was necessary due to the debt, explains today the CEO of Tim Pietro Labriola, proponent of the network sale project, in an interview with Repubblica . At the same time, Labriola said he is "very confident" of selling NetCo next year "by the summer." According to Il Sole 24 Ore “The closing for the network with KKR could arrive sooner than expected”.

All the details.

THE IMPELLENCE OF DEBT

KKR's offer values ​​the fixed network by up to 22 billion euros and allows the group a debt reduction of approximately 14 billion euros. The deal, which Telecom expects to close by the summer of 2024, should allow the company to reduce its debt by 14 billion euros.

“We sold the network to give a strategic opportunity to what remains,” Labriola said in an interview with Bloomberg on November 28, according to which Tim is not “for sale”.

And this morning Tim's CEO returns to the topic in an interview with Repubblica in which he highlights that "The risk of not being able to finance the debt today is really high and if things go wrong, it is the CEO who pays the consequences . If we remove the capex (capital investments) from our Ebitda (gross operating margin), we only have the money left to pay the interest on the debt. In a scenario of rising rates, we are heading for a financial crisis. So either you sell something or you do a capital increase, which no one wanted to do."

Regarding the urgency of the debt, Labriola specifies that it is “Nine billion euros in the next three years. But there is a problem not only of the cost of debt, but also of refinancing. Last year we did it, it doesn't mean we will always succeed. There is competition among those asking for financing so we must be good at repaying creditors and above all credible towards the market".

A LEANER SERVCO COMPANY

Afterwards, Tim's number one illustrated the structure of the new Tim (ServCo): "Of the 36 thousand current employees (full time equivalent), 20 thousand will go to NetCo, the company that will manage the network, while the other 16 thousand will report to the new Tim, divided into 5 thousand on Enterprise and the remaining 11 thousand on Consumer, of which 4 thousand in call centers. Here lies one of the differences with other competitors, who entrust these services to third parties". ( Here is Startmag 's in-depth analysis on What Tim will be like with the birth of Netco. Confidential document ).

LABRIOLA'S POSITION ON THE "OLD" TIM

But in addition to easing the debt pressure, there will be other benefits from the sale of the network according to the company head. “Separating the network from the services allows us to focus on customers and innovation. The vertical integration between the fixed network and services has penalized us on a regulatory level. Our market prices are regulated while those of our competitors are not" he observed to Repubblica Labriola.

“NEW” TIM READY FOR CONSOLIDATION

Furthermore, once the network is sold, the only way forward for the Italian sector is consolidation for Labriola.

“Tim is ready to play an active role in any context of consolidation of the telecommunications sector in Italy” underlined the company's CEO in an interview with Bloomberg TV this week. “Mergers and acquisitions are 'on the radar,'” Labriola added that the company is looking for options for its consumer unit where “it would be a buyer, not a seller.”

WORKING ON THE NEW PLAN

Meanwhile, management is preparing for the new “network-free” plan that will be presented at the investor day in March.

“It will be a plan that will restore strategic and industrial scope to the group. Thanks to the sale of the network, it will no longer be a survival plan. Indeed, we can reaccelerate and grow also through acquisitions. I'm not saying that we will announce some operations in March, but we will communicate a financial structure that will allow us to evaluate different paths. Today a dividend policy, for example, is still unthinkable, but after the closing we will have a solid capital structure (debt/Ebitda ratio less than 2 times) which will allow us to look around with a different perspective. Maybe also for capital operations: ours is 11 billion, when Enel's is 9 billion" he explained to Repubblica Labriola.

Once the network is handed over, “We will no longer be in emergency management. We need to rationalise, – added Tim's CEO – we have more than 120 corporate boxes that no longer make sense or shareholdings that are not strategic".

THE TIMING

The Tim assembly, scheduled for April 23, will have to approve the 2023 budget and appoint the new board that will lead the group towards the closing of the sale of the network.

“Already at the end of May, according to analysts, the finish line could be in sight, since six months must pass after its establishment before the sale of a business unit, November 24th for the division of the network. In the meantime, the authorization process at the EU Antitrust and that of the golden power should have been completed, which, according to estimates, should take two-three months" notes the Confindustria newspaper.

UNKNOWN VIVENDI

Finally, the Vivendi issue remains to be resolved.

As already mentioned, the board of directors' approval of the sale to KKR was immediately criticized by the French shareholder, who has long opposed the plans to sell the network, "Telecom Italia's most precious asset" as Bloomberg recalled. After the green light from the board of directors, Vivendi declared that "it will use all legal means at its disposal to contest this decision and protect its rights and those of all shareholders".

In this regard, Labriola underlined to Bloomberg TV how in this phase "dialogue with all stakeholders and not just with all shareholders is more important than ever. I have always been in contact with Vivendi to evaluate whether there was an alternative to our plan. “Vivendi – concluded Labriola – was on the board of directors in July when the plan for the separation and sale of the network was approved” but “there is no alternative plan” better than the operation just concluded on the network.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tim-vendera-la-rete-per-non-far-scoppiare-la-bomba-del-debito/ on Fri, 01 Dec 2023 11:14:06 +0000.