Telecom Italia Is Said to Propose Reorganization to Board

Telecom Italia SpA (TIT) is considering a reorganization of its domestic units under a plan that would create separate companies for its consumer and business services, according to a person with knowledge of the matter.

The carrier may create a holding company called Telecom Italia Services, and transfer at least four separate divisions under it: network spinoff candidate Opac SpA, retail customers, business clients, and customer services, said the person, asking not to be identified because the project is confidential. Details of the plan are still being worked out and no final decision has been made.

The company’s top managers plan to present the proposal to directors at a board meeting on Sept. 19, said the person. Creating separate companies would allow them to have their own balance sheets and reduce costs as Italy’s biggest phone company seeks to avert a cut to junk of its debt rating.

Telecom Italia, led by Chairman and Chief Executive Officer Franco Bernabe, is racing against time to seek fresh capital. The carrier has renewed contact with Egyptian billionaire Naguib Sawiris, whose bid to acquire a stake in the Milan-based carrier was rejected last year, people familiar with the matter said this week, asking not to be identified discussing confidential deliberations.

Photographer: Alessia Pierdomenico/Bloomberg

Logos for Telecom Italia SpA and the company's mobile unit TIM sit near satellite dishes and radio antennas on a communications tower in Rome. Close

Logos for Telecom Italia SpA and the company's mobile unit TIM sit near satellite... Read More

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Photographer: Alessia Pierdomenico/Bloomberg

Logos for Telecom Italia SpA and the company's mobile unit TIM sit near satellite dishes and radio antennas on a communications tower in Rome.

Telefonica Preference?

In a statement to Bloomberg News today, Sawiris said he’s still potentially interested in an investment in Telecom Italia, although he hasn’t made any offer since last October, when he sent a letter to the company’s board.

“Mr Sawiris is considering not submitting any proposal in view of the alleged preference for Telefonica reported in the Italian press,” according to the statement. Il Messaggero newspaper reported yesterday that Italy’s government may prefer a merger of Telecom Italia with its largest shareholder, Spain’s Telefonica (TEF) SA, to an agreement with Sawiris. The report didn’t cite anyone.

Telecom Italia is considering an overhaul of its ownership structure as Telco SpA, the holding company through which Telefonica and three financial investors own almost 22.5 percent of the carrier, is allowed to exercise a right to end the six-year partnership this month.

Telefonica is considering whether it would acquire additional shares from the partners, another person said.

A Telecom Italia spokesman who asked not to be named citing company policy declined to comment on the proposed reorganization or on the Sept. 19 board meeting.

‘Desirable Goal’

Gabriele Galateri, a Telecom Italia director speaking today in Cernobbio, Italy, was asked about a possible merger of equals with Telefonica.

“You’re putting many things together, a merger with Telefonica, a merger of equals,” said Galateri, who is also chairman of Assicurazioni Generali SpA (G), a Telco partner. “The European market needs consolidation. It’s definitely a desirable goal. Beyond which, whether it is possible or not possible depends on many factors. We’ll see.”

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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