(Bloomberg) -- In an almost unprecedented move, Italy’s government paused the planned sale of part of Telecom Italia SpA to a private equity firm at the eleventh hour, amid concerns the deal could damage plans to create a national champion.
With KKR & Co. poised to sign the purchase of the former phone monopoly’s secondary network, top ministers on Tuesday sent Telecom Italia Chairman Salvatore Rossi a last minute request for a one-month delay. The government views the sector as strategic and is keen to create a single ultrabroadband operator, according to people familiar with the matter.
Telecom Italia shares rose as much as 4% in Milan trading, giving the company a market value of about 8.1 billion euros ($9.6 billion).
The request marks another major intervention by Prime Minister Giuseppe Conte’s government into a decision of a private listed company after Autostrade, where the Benettons are being forced to exit the toll-road operator following a deadly bridge collapse in 2018.
The letter, signed by Finance minister Roberto Gualtieri and Development minister Stefano Patuanelli, coincided with a board meeting at Telecom Italia. It also follows attempts by Telecom Italia Chief Executive Officer Luigi Gubitosi to combine his company with government-backed rival Open Fiber SpA, a joint venture between Italy’s largest utility Enel SpA and state lender Cassa Depositi e Prestiti SpA.
Gubitosi has reiterated in the past months that the phone carrier needs keep the control the network while being available to open it to competitors. If the government is successful, Telecom Italia could be asked to cede the control on the network, according to people familiar with the matter.
CDP already owns 10% of the former incumbent and the government backs it’s involvement in the stake sale, the people said. French media conglomerate Vivendi SA is the company’s largest shareholder with a 24% stake.
“The board of directors looked very favorably upon the idea to speed up the single network project and will be enthusiastically taking part in the works the government intends to launch over the next few hours,” Telecom Italia said in a statement. The CEO will “discuss all the relevant aspects with the government authorities.”
Telecom Italia’s board of directors had gathered to approve the company’s second-quarter results, and were close to approving the sale to KKR of a 37.5% stake in the portion of its network that covers cables running from the street to premises, the people said. Swisscom AG’s Fastweb SpA Italian unit also plans to get a 4.5% stake in the new separated company, according to a company presentation published late Tuesday.
Representatives for Telecom Italia and KKR declined to comment.
New Deadline
Both Telecom Italia and KKR agreed to the suspension, which will see them postpone the sale of part of the asset until Aug. 31. The phone company’s board will meet again on that date, people said.
The government doesn’t want to interfere with Telecom Italia, but rather demonstrate a strong commitment to promoting a national and integrated ultrabroadband network, according to a government official. Telecom Italia’s project is key and the state is taking a broad strategic view on the matter, including the involvement of other institutional and market players, the official said.
Italy on Tuesday also submitted a project to create a single network to the phone company’s board, the official said.
Italy’s largest phone company reported sales of 3.8 billion euros in the second quarter, slightly missing the 3.84 billion euro consensus of analyst estimates compiled by Bloomberg.
Net income dropped to 118 million euros from 386 million euros a year earlier as the pandemic hurt footfall and depressed roaming fees. The company said it sees service revenue dropping in the mid-single digits for the full year.
(Updates with ministers letter, shares starting from second paragraph.)
©2020 Bloomberg L.P.
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