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Telecom Italia is considering a radical restructuring of its operations in a move that could see the Italian market leader sell all or part of its network and mobile telephony arms to concentrate on broadband and media services.
The restructuring, which could be announced as early as Monday, underscores the global uncertainty facing telecommunications operators as they struggle to find a successful strategy.
It also marks an astonishing U-turn for Marco Tronchetti Provera, TI’s chairman, who has spent the past two years touting the synergies available from a world in which mobile and fixed-line services were converging.
TI would not comment but people close to the discussions emphasised that no plan has been approved and that no firm decision on a sale of any part of the business has been taken. Any announcement by TI will probably be limited to a split of the company into three standalone businesses in order to maximise flexibility.
Just two years ago, TI bought the 44 per cent of its mobile arm it did not already own in a deal worth more than €20bn ($25.3bn).
A sale of Telecom Italia Mobile, which would be worth more than €30bn, could help to ease TI’s debt, which stands at about €40bn – the same as the group’s market capitalisation.
Part of TI’s network business may be sold first as regulators have been putting pressure on the former monopoly to separate the network from its other
TI is by no means the only telecoms company to go through numerous contortions as it seeks to overcome the decline of old business models and find a viable growth strategy.
Many companies are moving aggressively to offer movies or other packages of entertainment over telecoms networks.
Mr Tronchetti last week met Rupert Murdoch to discuss the possibility of TI offering media content provided by the media mogul’s News Corporation empire.
People close to the discussions said content was only one level of discussion and that larger financial deals could also be a possibility.
Mr Tronchetti, while selling his convergence plan to the markets, has insisted TI is worthy of the higher earnings multiple normally given to media companies but investors have been slow to share his view.
Regulators too have delayed, on competition grounds, plans by TI to offer “converged” products such as a handset that works on a fixed line and as a mobile phone, so adding to frustration within the company.
Mr Tronchetti, one of Italy’s most restless dealmakers, took over TI in a highly leveraged deal from his position as head of Pirelli in 2001.
He controls TI through shares held by Olimpia, a holding
company majority-owned by Pirelli.
Other Olimpia shareholders and TI’s board have yet to give their views on the plan, though many in the industry have voiced the view that TI needed to do something radical if it was not
A sale of the mobile business could be politically sensitive in a country which pioneered the growth of the business. All of TIM’s rivals are already in non-Italian hands.
The Benetton family, famous for its clothing company, this year told the Financial Times that it was unhappy with its investment in Olimpia and uncertain of TI’s future. It paid €1.5bn five years ago for a stake worth a third of that now.