Telecom Italia gave itself a month to decide on whether to move ahead with a possible tie-up with Hutchison Whampoa's 3 Italia, and also said it will make a decision on whether or not to spin off its fixed-line network on May 23.
According to Bloomberg, a panel led by CEO Franco Bernabe to investigate a link up with Hutchison's 3 Italia unit "acknowledged that there are no impediments to start a discussion," and has given itself 30 days to conclude the analysis of the situation.
Bernabe is said to be in favour of a deal that could help revive the Italian operator's fortunes. Indeed, first-quarter figures continued to illustrate the difficulties faced by the company, as it posted a 40 per cent decline in net profit to €364 million ($479.5 million) and an 8.1 per cent drop in revenue to €6.79 billion.
However, Bernabe has also noted that any deal with the Hong-Kong-based company would be "complex" because of regulatory hurdles, and said the company has not yet decided if such a deal is feasible, according to Dow Jones Newswires. Some shareholders, including Telefónica, are believed to be against a deal, according to a Bloomberg reprot citing unnamed sources, although Italian insurer Generali said it was in favour of any deal that would improve the value of its holding in Telecom Italia, Reuters noted.
Telecom Italia has also separately been discussing a possible spin-off of its fixed network--a move that would not only give all operators equal access to the network could also smooth the path to a deal with Hutchison as the network is considered to be an important strategic asset for Italy. The network has been valued at €12 billion-€15 billion.
The operator has said its board will convene a special meeting on May 23 to decide whether to go ahead with spinning off the network into a separate company, thereby preparing the way for a possible sale of a minority stake in the network. According to Reuters, Bernabe said a spin-off is a "complex process and would take time to execute." Nevertheless he has ruled out the sale of a majority stake, noting that a minority stake could be sold to state-backed financing body Cassa Depositi e Prestiti (CDP) after a separation.
Whether or not Telecom Italia comes to a decision in favour of either Hutchison or spinning off its network, the operator will likely need to do something. The company currently has a debt mountain of €28.8 billion and also faces additional investment requirements to upgrade its network.
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