New TIM CEO looking into network spin-off

TIM’s broad of directors has charged new chief exec Pietro Labriola with examining options for the future of its infrastructure assets, which could include a network spin-off.

The Italian incumbent’s network assets have been at the centre of debate for months, if not years, but the situation has intensified in recent weeks, following KKR’s takeover offer at the back end of last year.

To simplify somewhat, KKR’s offer naturally includes the network, but there’s a big question mark over whether the government would consider allowing a strategic national asset to change hands. To add a little more complexity, KKR is already a shareholder in TIM’s FiberCop project, which seeks to roll out full fibre in Italy and may or may not merge with Open Fiber, the country’s other – and also state-owned – major fibre builder. And being a private equity firm, those infrastructure assets are doubtless a pretty big draw for KKR… in addition to TIM’s deflated share price, of course.

All of which is a roundabout way of saying that Labriola’s first task as TIM CEO will have an impact on the proposed KKR deal, one way or another.

“The Board unanimously agreed to give the CEO a mandate to explore strategic options to maximize shareholder value, with specific reference to the Group’s infrastructure assets, including solutions that go beyond vertical integration,” TIM said in a statement, issued after its latest board meeting.

In case it’s not 100% clear, that essentially means Labriola is allowed to look into hiving off the network.

To add broader context, the aforementioned board meeting saw Labriola outline TIM’s so-called industrial plan for the 2022-2024 period, the full version of which he will present to the board in early March.

“The CEO highlighted the need to pursue a transformation process of the offering and services for the consumer segment; and to focus on the enterprise services such as Cloud, IoT, and Cybersecurity, leveraging the Group’s expertise and deep technological know-how, as well as the control of operating costs and operating profits,” TIM said. “Furthermore, the CEO underscored the need to guarantee a stable, long-lasting growth outlook for the network infrastructure, in the interest of all stakeholders.”

It is with those issues in mind that the board is considering a network spin-off. Such a move would theoretically leave a leaner TIM – one would assume that its hefty debt pile would be split between its constituent parts – with the ability to focus on the services side of the market, while the networks side of the business would be more easily able to push on with a merger with Open Fiber and bring itself up to date, technology-wise.

And KKR would find it harder to pursue a full takeover, of course.