Largo, largo. Restructuring at Telecom Italia, one of Europe’s more heavily indebted telecom incumbents, edged forward on Thursday with confirmation that its fixed-line network will be spun off. Details were thin following a board meeting. But the price for government support could be the acquisition of a large minority stake by the state’s Cassa Depositi e Prestiti in the copper and fibre assets. Talks between TI and CDP are continuing.
Investors in Telecom Italia, whose shares have lost a quarter of their value during the past 18 months, should not get too excited. True, the move is progress – and suggests that the board may have seen off rumoured objections from Telefónica, largest shareholder in a consortium that owns 23 per cent of TI. But the valuation of these network assets may be tricky. There has been talk of a €14bn figure, said to stem from putting a multiple on the business of 6 times enterprise value to earnings before interest, tax, depreciation and amortisation. That seems high compared with sector multiples – nearer 5 times – or with some valuation analyses of BT’s Openreach network, say. Admittedly, the lack of any significant cable infrastructure in Italy gives the TI business extra market clout. Conversely, the spun-out asset’s prospects may depend on details that have yet to be fully resolved – such as the regulatory framework that will govern third-party access to the network. Hard and fast numbers, or any accurate assessment of the benefits to TI’s balance sheet, look premature.
Whether this aids consolidation on the mobile front is also far from clear. The Italian market is split among four players and there have been talks between Hutchison’s 3 Italia and TI. Synergies would be welcome, but – network spin or not – regulatory scrutiny seems inevitable. Allegro tempo looks to be on hold.
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