MILAN (Reuters) – The new boss of Telecom Italia set out the virtues of his standalone plan as an alternative to a takeover approach from KKR but shares in the company plunged on Thursday after a record loss and a gloomy forecast for this year.
Newly-appointed CEO Pietro Labriola, who took the helm only in January after a string of profit warnings, said he would pursue a strategy to revamp Italy’s telecoms firm centred on a separation of its prized network operations.
An annual loss of 8.7 billion euros ($9.7 billion) forced TIM to suspend dividend payments and rattled investors, underscoring the challenges the debt-laden company faces.
TIM shares tumbled 16% to around 0.29 euros by 1225 GMT, moving back to levels seen just before KKR made its 0.505 euro per share approach in November. That approach valued TIM at 10.8 billion euros.
Based on the current group structure, TIM said it expected EBITDA to be stable over the 2022-24 period after a low-teens decrease in 2022, marking this one out as another tough year.
“We think that the size of FY21 losses leading to no dividends as well as the cautious 2022-24 targets came as a surprise,” Intesa Sanpaolo analysts wrote in a research note.
Backed by TIM’s leading investors Vivendi and state lender CDP, Labriola pointed out his plans for TIM mirrored those outlined by KKR. Vivendi has indicated it thinks the KKR bid is too low.
“Once KKR expresses interest at that price, you realise that the real value of the company is higher,” Labriola, a former head of the Brazilian operation, told reporters.
“If we do it internally the value generated can probably be redistributed among all shareholders, majority and minority,” he added.
The former phone monopoly said late on Wednesday that an assessment by its advisers on KKR’s approach would be finalised shortly and the board would then decide on it. A verdict is expected by mid-March, a source familiar with the matter said.
Separating Telecom Italia’s main businesses could ease a deal to merge its fixed network with that of rival state backed fibre optic firm Open Fiber, a move advocated by CDP.
CDP, which controls a 10% stake in TIM to oversee network assets deemed as strategic by the government, owns a 60% stake in Open Fiber.
KKR is already involved in TIM’s network asset after paying 1.8 billion euros last year for a 37.5% stake in its secondary network, known as FiberCop.
There has been speculation that KKR could ditch its takeover approach and settle for a strengthened role in the new TIM network business but Labriola said there had been no talks on that with the U.S. fund.
($1 = 0.9016 euros)
(Additional reporting by Valentina Za; Writing by Keith Weir; Editing by Jane Merriman and Susan Fenton)