{"id":12718,"date":"2023-11-12T00:03:11","date_gmt":"2023-11-12T00:03:11","guid":{"rendered":"https:\/\/infundpros.com\/business\/telecom-italia-boss-defends-kkr-deal-as-only-way-to-secure-groups-future\/"},"modified":"2023-11-12T00:03:11","modified_gmt":"2023-11-12T00:03:11","slug":"telecom-italia-boss-defends-kkr-deal-as-only-way-to-secure-groups-future","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=12718","title":{"rendered":"Telecom Italia boss defends KKR deal as only way to secure group\u2019s future"},"content":{"rendered":"<div>\n<p>Unlock the Editor\u2019s Digest for free<\/p>\n<p class=\"article__content-sign-up-topic-description\"><span>Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=8a307327-e2e9-409c-acc9-061c0578b141\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>The chief executive of Telecom Italia has argued the group\u2019s proposed \u20ac22bn deal to sell part of its business to KKR is the only way to ensure its future, despite objections from its biggest shareholder Vivendi.<\/p>\n<p>In his first interview since a nine-month negotiation over the deal ended, Pietro Labriola said: \u201cIt\u2019s not like we\u2019ve suddenly pulled a rabbit out of a hat\u2009.\u2009.\u2009.\u2009the group has discussed the network sale at least five times since 2013.\u201d<\/p>\n<p>Telecom Italia\u2019s board this week accepted the offer for its fixed-line phone and internet network, which would be split from its services business. <\/p>\n<p>French media conglomerate Vivendi, which had sought a more than \u20ac30bn price for the deal, has said the board\u2019s decision was \u201cunlawful\u201d without a shareholder vote. It is now threatening the company with legal action but Telecom Italia\u2019s lawyers told analysts on Thursday that no complaint had been lodged yet. <\/p>\n<p>\u201cThe board of directors, including representatives of our largest shareholder, unanimously approved an industrial plan which envisaged a sale of the network as a way to deleverage the company, and that\u2019s exactly what we did,\u201d Labriola told the Financial Times.<\/p>\n<p>The deal will allow junk-rated Telecom Italia to cut its debt from the current \u20ac26bn to \u20ac14bn and has prompted rating agencies Fitch, S&amp;P and Moody\u2019s to place the group in review for a rating upgrade this week.\u00a0<\/p>\n<p>\u201cIn the past it was easier to take a wait-and-see approach,\u201d Labriola said, adding: \u201cNow, with our interest payments rising, it was no longer possible.\u201d<\/p>\n<p>Telecom Italia\u2019s interest payments have risen to \u20ac1.3bn in the nine months to September, wiping out its margins over the period.\u00a0<\/p>\n<p>In 2022, it took a \u20ac2bn impairment charge after issuing three profit warnings in 2021, the last one right after KKR\u2019s first \u20ac33bn offer, which envisaged taking the company private and led to the ousting of Labriola\u2019s predecessor.\u00a0<\/p>\n<p>The reshaping of the company has often pitted management against Vivendi \u2014 which has spent \u20ac4bn since 2015 to build a 24 per cent stake. Telecom Italia\u2019s share price has fallen from \u20ac1 per share in 2015 to the current \u20ac0.26 and Vivendi has had to write down its investment twice. <\/p>\n<p>\u201cWe took the company apart and put it back together like a Lego set multiple times to see if there were other ways forward and there weren\u2019t,\u201d said Labriola.\u00a0<\/p>\n<p>He added that the group had also considered a demerger as well as selling other assets, including its profitable Brazilian operations, to reduce its debt. \u201cBut those weren\u2019t viable plans\u2009.\u2009.\u2009.\u2009Brazil is where 30 per cent of our [earnings] come from,\u201d said Labriola.<\/p>\n<p>\u201cOf course, we also looked at keeping the network and selling the services company, but the truth is that it wouldn\u2019t have solved our debt problem and there wasn\u2019t a queue of buyers beating down the door.\u201d<\/p>\n<p>Telecom Italia\u2019s consumer business includes certain coverage and customer migration commitments with Fibercop, the company that is 37.5 per cent owned by KKR and that operates the last mile of the telecoms network in Italy. Any potential buyer would have had to take on such commitments weighing on the valuation, according to Labriola.\u00a0\u00a0<\/p>\n<p>He also rejected criticism that shareholders had not been given a vote on the KKR deal, saying this was not required because \u201cTelecom Italia\u2019s corporate purpose will not change\u201d. <\/p>\n<p>\u201cIt\u2019s like saying that a restaurant\u2019s business purpose changes if the owner sells the property in which the restaurant is located [while continuing to operate it],\u201d he added.\u00a0<\/p>\n<p>\u201cOur bylaws don\u2019t require us to own the infrastructure.\u201d<\/p>\n<p>However, he offered angry shareholders an olive branch: \u201cLet\u2019s sit down and talk,\u201d he said, suggesting any legal action would be a distraction from business.<\/p>\n<p>\u201cThis [deal] is not just a financial operation, it will finally give us the opportunity to invest both within our company and outside, which is pivotal amid the current transformation within our sector,\u201d he said.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.ft.com\/content\/8a307327-e2e9-409c-acc9-061c0578b141\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. The chief&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"class_list":{"0":"post-12718","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Telecom Italia boss defends KKR deal as only way to secure group\u2019s future | inFundPros<\/title>\n<meta name=\"description\" content=\"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The chief executive of Telecom\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/infundpros.com\/?p=12718\" \/>\n<meta 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