MILAN (Reuters) - Leading Telecom Italia (BIT:TLIT) (TIM) investors will resume talks with Italian government officials on Thursday seeking to fix the former phone monopoly's woes once and for all.
Crippled by a huge net financial debt burden -- totalling some 25.5 billion euros last September -- TIM has seen stiff price competition steadily erode earnings in its key domestic market.
Plans under discussion centre around a split of TIM's wholesale landline and submarine network assets from its service operations, with the former assuming a significant portion of the company's debt and staff.
Parties involved failed to reach common ground on key issues in a first round of negotiations in December, with asset valuations, debt and staff allocations remaining stumbling blocks.
Here is what the various parties are looking for:
THE GOVERNMENT
Prime Minister Giorgia Meloni's right-wing government wants to secure control of TIM's landline grid and its submarine cable unit Sparkle, both deemed strategic, while safeguarding TIM's 40,000 staff in Italy.
However, senior government figures have different views on how to achieve that.
The administration is also studying a cut in VAT sales tax for some connectivity services as well as other measures to help telecoms companies boost profitability.
CASSA DEPOSITI E PRESTITI (CDP)
Treasury-owned CDP already owns 10% of Telecom Italia. Together with international funds, it wants to promote a buyout of the network business, which it values in the region of 17-18 billion euros, including debt. CDP also owns a 60% stake in TIM's smaller rival Open Fiber, meaning it could combine their joint infrastructure at a later stage.
VIVENDI
After opposing for years the idea of TIM ceding control of its main network asset, top investor Vivendi (OTC:VIVHY) has warmed to the idea but is seeking a valuation of 31 billion euros to back a sale to CDP.
The French media company has spent about 4 billion euros building its 24% stake since 2015 and faces a theoretical loss of some 3 billion euros at TIM's current depressed market value.
Controlled by billionaire Vincent Bollore, Vivendi has also proposed splitting TIM's service and fixed network assets into two listed companies. Vivendi would then exit the infrastructure business to focus on its service operations, which include pay-TV platform TimVision.
INFRASTRUCTURE FUNDS
KKR and Macquarie, which hold minority stakes in TIM and Open Fiber's networks respectively, could be involved in a government-sponsored bid for TIM's grid, as well as Global Infrastructure Partners. Investment firm CVC also expressed interest in TIM's assets last year.