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Telecom Italia to cut thousands of jobs in break-up plan

Published Jul 07, 2022 01:27AM ET Updated Jul 07, 2022 07:41AM ET
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© Reuters. FILE PHOTO: The Tim logo is seen at its headquarters in Rome, Italy November 22, 2021. REUTERS/Yara Nardi
 
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By Elvira Pollina

ROME (Reuters) -Telecom Italia (TIM) could cut more than 9,000 jobs by 2030 and is ready to offload its fixed network business under a plan that would reshape the debt-laden former telecoms monopoly.

Italy's biggest telecoms company is saddled with 23 billion euros ($24 billion) of net debt while contending with shrinking revenue in its fiercely competitive home market.

Under a strategic plan unveiled by new CEO Pietro Labriola on Thursday, TIM said it would spin off its domestic fixed access network and submarine cable unit Sparkle into a separate company called NetCo, which would carry up to about 11 billion euros of the company's debt.

The plan from Labriola, TIM's fifth CEO in six years, involves cutting thousands of jobs from its workforce of 41,000 by 2030. He billed it as one of the most significant transformations of a legacy telecoms company in Europe.

Labriola told analysts that job cuts would be based on an existing early retirement programme and that talks were already under way with unions.

A central plank of the restructuring is a possible deal to combine NetCo with rival Open Fiber, allowing state lender CDP to take control of a combined entity that would aim to improve broadband coverage and speeds for Italians.

Labriola said that an Open Fiber deal was the preferred option and could be agreed by the end of October but added that there is a plan B in the form of NetCo stake sales.

The valuation of NetCo is a sticking point with leading TIM shareholder Vivendi (OTC:VIVHY), which is pushing for TIM to obtain a premium price in ongoing negotiations on a potential Open Fiber deal.

DEBT REDUCTION

TIM is also counting on transactions such as the sale of a minority stake in the newly created enterprise services unit to reduce overall net debt below 5 billion euros, down from a pro-forma level of about 20 billion in the first quarter.

Shares in TIM shed initial gains and traded 1.2% down by 1130 GMT, at a little more than 0.25 euros, not far off the record low of 0.22 euros hit in March.

Analyst Andrea De Vita said the job cuts would cost about 2 billion euros and noted that there was little new on the potential Open Fiber deal or sale of other parts of the business.

TIM said its service operations will include Brazilian-listed unit TIM Brasil and domestic service activities, which will be split into two units, each with specific financial targets.

Besides the consumer arm, the enterprise company will combine connectivity services for big corporate and public administration clients as well as cloud, cybersecurity and Internet of Things businesses.

($1 = 0.9799 euros)

Telecom Italia to cut thousands of jobs in break-up plan
 

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