Shares in Telecom Italia plunged more than 16 per cent on Thursday after the group announced plans to split itself into two as it tries to fend off a € 10.7bn bid by private equity group KKR.
Italy’s biggest telecoms company also reported a net loss of € 8.7bn for 2021 and said it would not pay a dividend on ordinary shares. It had reported a net profit of € 7.2bn in 2020.
The group reported a net loss of € 8.6bn for the fourth quarter, compared to net profit of € 6bn a year earlier.
New chief executive Pietro Labriola proposed hiving off the group’s Italian fixed network to carve the company into two chunks. One unit, ‘Netco’, would encompass this fixed network that would rent out capacity to all players in Italy while another, christened ‘Serco,’ would hold all the remaining assets including its mobile business and Brazilian unit.
The carve out of the fixed network could also pave the way for a combination with state-backed rival Open Fiber, something Labriola has previously said he supported.
Telecom Italia said on Wednesday evening as it disclosed results that it would “shortly” provide an assessment of the bid made by KKR in November, a proposal which also involves breaking up the group.
Labriola, who ran Telecom Italia’s Brazilian division until his appointment as chief executive last November, said that KKR’s offer “includes some elements of uncertainty”, according to comments reported by Bloomberg.
The US buyout fund has offered € 0.505 a share in cash, giving Telecom Italia an equity value of € 10.7bn. Telecom Italia also has roughly € 22.5bn or net debt.
The group’s share price has fallen by 36 per cent so far this year, to reach 29 cents, below the offer made by KKR.
KKR’s takeover attempt, which would represent the biggest private equity buyout of any telecoms company in Europe, sent shockwaves through the Italian establishment. It was also initially met with skepticism and judged too low by Telecom Italia’s biggest shareholder, French media group Vivendi, which owns a 17 per cent stake.
Vivendi declined to comment on Thursday, but has previously signaled that it supported the idea of splitting up Telecom Italia if it benefited shareholders and received government support. KKR also declined to comment.
Telecom Italia’s shares have underperformed the European telecoms sector for years because of the competitiveness of the crowded market and repeated battles for control for the company. Its market value had dropped to € 7.5bn even before KKR’s offer with further damage coming from the 2018 entry of price-cutting newcomer Iliad, controlled by French billionaire Xavier Niel.