KKR’s bid target Telecom Italia set to make veteran manager Labriola CEO

January 21, 2022

By Elvira Pollina

MILAN (Reuters) – Telecom Italia (TIM) is set to appoint General Manager Pietro Labriola as CEO on Friday as the former phone monopoly weighs a response to a takeover approach by U.S. private equity investor KKR. Labriola, a veteran TIM executive who has run TIM’s Brazilian operations for the last three years, was promoted to general manager in November, when former CEO Luigi Gubitosi stepped down following a string of profit warnings.

Under pressure for years in its competitive domestic market, debt-laden TIM needs to upgrade its network to meet Italy’s digital plans to boost broadband speeds for millions of households and businesses. The group’s largest investor French media giant Vivendi has backed Labriola’s nomination.

Vivendi, which holds 24% of TIM, has criticised KKR’s 10.8 billion euro ($12.2 billion) offer, saying it does not reflect the value of Italy’s biggest telecoms operator.

State lender CDP, TIM’s second-largest investor, is also expected to back Labriola’s appointment at a board meeting on Friday, sources close to the situation have said, asking not to be named. Labriola already has responsibility for devising a business plan to revamp the group that would serve as a benchmark for the company’s board to weigh against KKR’s proposal.

Under a preliminary version presented to the board of directors this week, Labriola drafted proposals to split the company’s fixed network operations from its services businesses, the sources said.

The “NetCo” comprising TIM’s infrastructure assets would focus on its wholesale-only business. It would include submarine cable unit Sparkle, while assuming a significant portion of the company’s debt and staff, the sources added.

Such a move could help revive a stalled plan to merge TIM’s fixed network assets with those of fibre optic rival Open Fiber. CDP, which owns 60% of Open Fiber, would likely emerge as a major stakeholder in any combined network venture with TIM.

Vivendi, which last month https://www.reuters.com/markets/deals/vivendi-is-open-discuss-with-rome-over-state-control-tims-network-2021-12-05 reversed its long-standing opposition to TIM’s handing over control of its prized network infrastructure, could then focus on TIM’s retail service businesses, which include video content platform TimVision, one of the sources said.

KKR’s takeover proposal is conditional on backing by TIM’s board and the Italian government, which deems the group’s network infrastructure strategic and has special powers to block unwanted interest.

KKR, which already holds 37.5% of TIM’s last-mile grid, plans to carve out the fixed assets and give CDP a leading role in overseeing them, the sources said.

Any goverment decision on how to address TIM’s situation is on hold in Rome ahead of next week’s presidential election.

($1 = 0.8821 euros)

(Reporting by Elvira Pollina; Editing by Keith Weir and Barbara Lewis)