Telecom Italia to sell TIM

Permira, Carlyle Group and Apax Partners are reportedly mulling separate bids for TIM, the mobile unit of Telecom Italia, in what would be Europe’s biggest ever buyout.

TIM has attracted the interest of private equity firms following news that the board of the Italian telecommunications business is to meet to discuss an overhaul of the entire group. With a possible market capitalisation of €46bn (US$58.5bn), the deal would be Europe’s largest to-date.

On September 12, Telecom Italia confirmed that the board would meet to discuss a potential reorganisation of the group into new businesses, but said that it would not consider asset sales at this point. However, Borsa Italiana has suspended Telecom Italia’s shares pending a statement from the group.

Telecom Italia’s proposed restructuring has led to calls for the Italian government to block a potential break-up of the group. Sources told IFR Buyouts Europe that some members of the Italian government were divided between approving selling parts of the business and avoiding further acquisitions of Italian companies by foreign bidders.

France Telecom, Telefonica and Deutsche Telekom have been tipped as potential strategic bidders for TIM.

Troncheti Provera, chairman of Telecom Italia, is understood to be planning to reinvent the group as a broadband and content provider rather than a traditional telecoms business. Provera reportedly said that no bids had so far been received; that the group had not set a price for the businesses; but that he would be duty-bound to consider any bid that emerged.

Prime Minister Romano Prodi has already stressed that he would not intervene in any sale but despite the fact that the Italian government no longer owns Telecom Italia, any transfer of ownership to a foreign party would be likely to encounter robust opposition.

Communications Minister Paolo Gentiloni has said that a rapid sale by Telecom Italia of mobile division TIM would be unacceptable. In an interview with Il Messaggero, Gentiloni said that the government respected shareholders and wanted to see what the future developments of Telecom Italia’s planned reorganisation of the group would involve.

But he added that TIM was a strategic asset for the country and he did not want to see the country weakened.

Gentiloni said the general interest of the country needed to be safeguarded. He added that Telecom Italia needed to know the government would not accept an outcome that would “weaken the system”. The minister said the idea of spinning off the fixed-line telephone network was a positive development but should not be used to justify other operations.

The group has seen its share price drop dramatically in the past year. In early January, Telecom Italia’s shares were trading at around €2.65 but had fallen to €2.00 by the end of July. News of a possible agreement with Rupert Murdoch’s News Corp over a content deal has seen the shares rise slightly to close last Friday at €2.26.

In November 2005, Carlyle appointed Marco de Benedetti, previously chief executive of Telecom Italia Mobile, as managing director and head of its Italian buyout team in Milan.

Earlier this year, Permira and Apax Partners were part of a consortium that acquired listed Danish telecoms operator TDC in a deal valuing the business at €13bn.

In April, Blackstone Group paid about €2.68bn to acquire 4.5% of Deutsche Telekom.

However, Carlyle, Permira and Blackstone were defeated in their bid to acquire Amena, with the mobile unit of Spain’s Auna going to France Telecom in July 2005. And private equity firms again lost out to trade buyers in the race to acquire Italian group Wind, which was acquired by Egyptian entrepreneur Naguib Sawiris for €12.1bn.