Telecom Italia Investor Findim Needs Pledge to Back Share Sale

Telecom Italia SpA (TIT)’s second-largest shareholder said it would support a stock sale by the carrier on condition that it’s backed by a business plan to return Italy’s biggest phone company to growth.

“In order for Findim to participate in an eventual Telecom Italia capital increase, our group would need a strategic business plan that will create real value for the phone company, on which the management’s credibility will hang,” Marco Fossati, whose Findim Group SA owns about 5 percent of Telecom Italia, said in an interview Aug. 30.

Chief Executive Officer Franco Bernabe is racing against time after rating companies put Telecom Italia’s debt under review for a possible downgrade to junk. A cut to non-investment grade -- Telecom Italia’s adjusted net debt of 28.8 billion euros ($38 billion) is almost triple its market value -- would put the Milan-based carrier in the same league as Portugal Telecom SGPS SA and Greece’s Hellenic Telecommunications Organization SA.

Telefonica SA (TEF), Mediobanca SpA, Assicurazioni Generali SpA (G) and Intesa Sanpaolo SpA (ISP) together own almost 22.5 percent of Telecom Italia through holding company Telco SpA. The partners, which agreed in February 2012 to renew their agreement for three years with an exit option in September 2013 and August 2014, may use the first window this month to revoke that accord, a person with knowledge of the matter has said.

Telefonica’s Call

Telefonica, which owns 46 percent of Telco, last month sweetened its bid for Royal KPN NV’s German wireless business to 8.55 billion euros in order to win the backing of KPN’s largest shareholder, America Movil SAB, for the transaction.

“It’s time for Telefonica to declare where it stands, the time for waiting and be passive is finished,” Fossati said. “Now is the time for Telefonica to decide which role it wants to play in Telecom Italia.”

Telecom Italia directors are scheduled to meet Sept. 19. CEO Bernabe said Aug. 2 in a conference call with analysts that the company doesn’t need a capital increase or a sale of the Brazilian unit to reach a year-end net debt target of less than 27 billion euros. A company spokesman couldn’t immediately be reached for comment.

After failing to sell a stake to Hutchison Whampoa Ltd. (13) earlier this year, Telecom Italia is now focusing on a spinoff of its fixed-line assets. Bernabe is relying on growth in Brazil and Argentina, which account for about 40 percent of the company’s revenue, to offset a slump in its home market.

“Tim Brazil’s sale would partially solve Telecom Italia’s financial problems in the short term but probably would compromise the future creation of equity value,” Fossati said.

To contact the reporter on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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