Telecom Italia plans ‘driving asset sales’

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Telecom Italia’s need to find billions of euros to make investments in the next generation of broadband networks is driving the company towards controversial sales of large assets, according to sources close to the company.

Italy’s dominant telecoms company has still not communicated fully to investors why it announced a split into three last week, a move that has led to a vociferous dispute with the government and the resignation of Marco Tronchetti Provera, the company’s chairman.

But people close to the strategy talks said on Monday that a focus on the growth of broadband and media services in Italy and internationally would involve rapid and significant investment to beat rivals. Credit ratings agencies would probably not approve the issuance of more debt, the people said, so asset sales might be needed.

More details of the plans under consideration emerged on Monday as Angelo Rovati, an adviser to Romano Prodi, the Italian prime minister, resigned in an effort to protect the premier from embarrassment.

Prosecutors in Rome also said on Monday they had opened a file on TI’s disclosures to regulators and investors over the restructuring plan. A probe was inevitable after the company and Mr Prodi’s office clashed last week in their accounts of what had been discussed. Prosecutors stressed that no individuals had been placed formally under investigation.

Politicians and unions are particularly worried by suggestions that TI might sell Telecom Italia Mobile in its effort to focus on broadband. But Guido Rossi, the respected lawyer who took over from Mr Tronchetti on Friday night, has pledged to continue with the restructuring plan.

Asset sales in Brazil or of part of TI’s fixed-line Italian infrastructure could come first, though no formal decision has been taken on sales.

The company, which this week will be discussing the valuation of its various businesses with bankers, needs to invest to allow households to receive data at speeds of up to 50Mb a second, up from the current broadband capability of 20Mb.

TI, people close to its strategy talks say, sees 50Mb broadband as necessary to handle the forecast demand for programmes. TI also wants to acquire broadband interests outside Italy.

This weekend it paid €675m ($856m) for AOL’s broadband interests in Germany with 2.5m customers.

Regulators have stifled other attempts to grow on competition grounds, the people close to TI said.

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