Telecom Italia’s €42bn (US$53) mobile division, TIM, continues to be the subject of private equity bid interest. Texas Pacific Group, Blackstone, Kohlberg Kravis Roberts, Carlyle Group and Providence Equity Partners are understood to have created an early-stage consortium to make an offer for the mobile unit.
Permira is thought to be involved as well, while Apax Partners has taken a look at the business. Bain Capital may also join in.
The chairman of McDonald’s Italia, Signor Resca, has even told the Italian press that a number of foreign funds have approached him about investing in Telecom Italia.
But any consortium might not get off the ground if the Italian government decides to block a potential deal. Romano Prodi’s government has a “golden share” in Europe’s fifth-largest telecoms provider and has come under pressure in recent weeks from Italy’s General Union of Labour (UGL) and politicians not to sell off TIM, which would be likely to result in job losses.
Any use of the golden share would, however, provoke intervention from Brussels. EU governments can only use golden shares on the grounds of national security within the EU’s internal market.
“If TIM does come out of Telecom Italia, you need 20 private equity funds to write a cheque,” according to a banker following the situation.
“It’s a bugger’s muddle and I don’t believe anyone knows what is going to happen,” another source said.
For the time being, a deal seems to have stalled. On September 26, Luigi Vimercati, an undersecretary in Italy’s Ministry of Communications, told journalists that there were no longer any talks related to the sale of TIM.
Telecom Italia, which has about €40bn in net debt, is still expected to spin off TIM as part of an efficiency drive to reduce its costs and re-invent itself as a broadband and content provider. It was this board decision announced on September 11 – and the political opposition to it – that led to the resignation of Marco Tronchetti Provera, Telecom Italia’s chairman, on September 15.
Provera is still, however, seen as the key to any future TIM deal. He continues to be chairman of Pirelli, which holds more than 70% of Olympia, which owns 18% of Telecom Italia.