(Bloomberg) -- Italian government officials are reviewing options for Telecom Italia SpA including a possible state-backed takeover bid, as Giorgia Meloni’s administration looks to set a policy for shoring up the debt-ridden phone carrier. 

The government is expected to accelerate turnaround efforts for the company, which issued three profit warnings last year and has lost ground in its home market to low-cost rivals. But leaders including Meloni and Finance Minister Giancarlo Giorgetti have not yet made a decision on their exact approach, according to people familiar with the matter.

The so-called Project Minerva initiative, developed by Meloni’s Brothers of Italy party before the September elections, calls for Italy to first take over Telecom Italia and then combine it with smaller rival Open Fiber SpA.

The goal would be to retain control of the former phone monopoly’s network after disposals and use the cash raised to reduce the company’s debt pile. 

Telecom Italia shares trimmed their earlier declines following the Bloomberg report. 

Meloni’s government shares the goal of Italy’s previous government, led by Mario Draghi, of creating a single national network to help speed the digitalization of the country. 

Meloni Party Plan

But under her party’s plan, drawn up by undersecretary for technological innovation Alessio Butti, state lender Cassa Depositi e Prestiti SpA would bid for all of Telecom Italia rather than just buying its landline network to combine with Open Fiber’s. Cassa Depositi owns nearly 10% of Telecom Italia and controls Open Fiber. 

Representatives for Italy’s government, Cassa Depositi, Telecom Italia and Open Fiber each declined to comment. 

If Meloni goes ahead with the new project, Italy may seek to include international funds including KKR & Co. in a bid, possibly also inviting in Telecom Italia’s top shareholder Vivendi SE, according to the people. KKR already holds a stake in the phone carrier’s Fibercop unit.

Telecom Italia shares have declined about 45% this year, compared with a decline of some 5% for the Euro Stoxx Telecommunications Index. The ex-monopolist, which still needs to deal with its €30 billion ($30 billion) of debt, has lost 1.6% in landline services market share as of last June, according to communications authority Agcom.  

Memorandum of Understanding

As Meloni reviews her options, Telecom Italia is still waiting for a non-binding offer for its network from Cassa Depositi and other investors including KKR and Macquarie Group Ltd, after the deadline for bids under a memorandum of understanding was postponed to the end of this month.  

Still, the network’s value remains a sticking point. Telecom Italia’s advisers initially assessed it at about €20 billion and Cassa Depositi was weighing an offer of around €15 billion to €18 billion. Vivendi has sought about €30 billion for the asset, people familiar with the matter said earlier this year. 

Read more: Italy’s Right Plans Telecom Italia Takeover to Halve Debt

Even before her right-wing coalition won the September general elections, Meloni’s Brothers of Italy party had argued that a takeover of Telecom Italia by Cassa Depositi was preferable to the grid-only option favored by the Draghi government. 

Butti said on Saturday that a plan for the network, which would be controlled by the state, is “a priority.” Vivendi is open to discussions with Rome on creating a single landline network, Bloomberg reported on Sunday.

 

 

 

(Updates with shares in fifth paragraph.)

©2022 Bloomberg L.P.