Telecom Italia Said to Plan Hiring Advisers for Grid Spinoff

(Bloomberg) -- Telecom Italia SpA plans to hire advisers to explore a spinoff of its landline network, a move that would address government concerns about main shareholder Vivendi SA’s influence over an asset viewed as in the national interest, people familiar with the matter said.

The carrier would keep control of the network, and a sale of a minority stake would raise cash to help Telecom Italia reduce its debt pile, said the people, who asked not to be named because the discussions are private. Chief Executive Officer Amos Genish disclosed the plans to hire two advisers to evaluate costs and benefits of a spinoff to Carlo Calenda, Italy’s minister of economic development, in a meeting in Rome on Monday, the people said.

The network has a book value of about 15 billion euros ($17.8 billion), about the same as Telecom Italia’s current market capitalization. Vivendi is Telecom Italia’s biggest investor with almost 24 percent, and the government is concerned that the French media conglomerate is boosting its influence over an asset of strategic national importance.

Shares of Telecom Italia jumped as much 6.2 percent, the most in almost four months, and were up 5.6 percent at 73 cents as of 1:09 p.m. in Milan. Trading was briefly halted after the stock began soaring.

“We had a very fruitful discussion and the relation is now very constructive,” Calenda said in an interview Thursday at a Rome event. “I think they are considering all the options.”

Calenda declined to comment on Telecom Italia’s plan to hire advisers for a network spinoff. A Telecom Italia spokesman said that Genish didn’t discuss a separation of the network at the meeting with the minister, and that the company is autonomously evaluating options for the grid.

The discussions aren’t about who controls Telecom Italia or the network, but rather about "whether the structure will be one company or two separated companies," Calenda said. Telecom Italia should consider separating the network, Calenda said Nov. 22 in an interview with Radio Capital.

“Selling down a stake in the Italian landline network is an option if the opportunity is right, as long as Telecom Italia remains the controller,” Genish said last week at a Morgan Stanley event in Barcelona. “We want to control the network, but we don’t need to control it 100 percent.”

Genish, a former Vivendi executive, was appointed to the top job at Telecom Italia in September. He is seeking to mend Telecom Italia’s relationship with the Italian government after months of clashes under his predecessor Flavio Cattaneo.

"Telecom Italia and its new top management want to reaffirm the role of Italy in Europe as one of the most innovative digital players," Antonello Giacomelli, Italy’s undersecretary for telecommunications, said at a Telecom Italia event in Turin on Wednesday.

Last month, Italy asserted “golden power” authority over three Telecom Italia units considered of national interest, triggering new oversight and raising the possibility of asset sales at the company. Premier Gentiloni decided to apply the powers to the company’s main phone service, branded TIM, and two other units: its Sparkle wholesale arm, which owns underwater cables from the Mediterranean region to the U.S. and Israel, and a smaller unit called Telsy Elettronica that supplies cryptography for mobile phones used by the military and top politicians.

Telecom Italia may discuss a landline-network spinoff at a board meeting scheduled for Dec. 5, La Stampa reported Thursday.

--With assistance from Flavia Rotondi

To contact the reporters on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net, Tommaso Ebhardt in Milan at tebhardt@bloomberg.net, John Follain in Rome at jfollain2@bloomberg.net.

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Ville Heiskanen, Dan Liefgreen

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