Telecom Italia Advisers Put $31 Billion Value Post Grid-Deal

Daniele Lepido and Chiara Albanese, Bloomberg News

A pedestrian uses a mobile device as she walks past a Telecom Italia SpA (TIM) store, in Rome, on Sept. 25, 2017. , Photographer: Alessia Pierdomenico/Bloomberg

(Bloomberg) -- Advisers for Telecom Italia SpA see the troubled phone carrier reaching a total valuation of as much as 27.8 billion euros ($30.6 billion), if its asset separation plan achieves its goal of creating a single fixed-line network in Italy, people familiar with the matter said.

Under this scenario, the Italian carrier would be worth more than twice as much as private-equity firm KKR & Co. offered for the firm in November and over four times its current market value of 5.8 billion euros.

A new strategy announced by Chief Executive Officer Pietro Labriola earlier this month could push the ex-monopolist’s value to 1.3 euros per share if its landline assets are fully separated and then merged with smaller, state-backed Open Fiber SpA, said the people, asking not to be named discussing private deliberations.

Labriola’s plan is aimed at extracting value for its investors by separating the infrastructure unit from the commercial business. Telecom Italia shares fell to a record low at 0.236 euros a shares earlier this month.

Under an alternative scenario, the carrier’s advisers see a valuation for Telecom Italia of about 1 euro per share without a combination with Open Fiber. In this case, a controlling stake in the spun-off network unit would be sold off to infrastructure funds, possibly including KKR, the people said.

Both scenarios envisage sales of stakes in enterprise and IT solutions assets including cloud unit Noovle SpA and cybersecurity unit Telsy, in addition to about 700 million euros in cost savings over three years, the people said.

A spokesman for Telecom Italia declined to comment.

Telecom Italia has called a board meeting for March 13 to come up with a response to the KKR offer, people familiar with the matter said. A number of board members, particularly independent directors, favor asking a special committee to seek more details from KKR, as they view the bid as lacking in some key specifics, the people said.

The carrier’s two biggest investors, France’s Vivendi SE and Italy’s state lender Cassa Depositi e Prestiti SpA, have repeatedly said the KKR bid doesn’t adequately reflect the company’s value.

Telecom Italia reported a record 8.6 billion euro-loss for the fourth quarter after booking impairment charges in preparation for the spinoff of its landline network.

The most recent plan by Labriola, a 54-year-old veteran telecommunications veteran, is designed to counter the KKR bid.

Labriola is seeking a memorandum of understanding as soon as this week with Cassa Depositi on the merger with Open Fiber, people familiar with the matter said. Cassa Depositi, which owns about 10% of Telecom Italia, is also Open Fiber’s largest shareholder.