Telecom Italia Landline Spinoff Uncertain Amidst Italian Political Turmoil, Interest From Egyptian Billionaire

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Discussions of a possible spinoff by Telecom Italia(TI) have been a rocky road with nary a marshmallow in sight. A month ago, Reuters reported the spinoff was ‘stalled’.  Egyptian Billionaire Naguib Sawiris, who has proposed injecting $3.9 Billion into the company is opposed to the plan.

Sawiris told Reuters he was also opposed to a current plan to spin off Telecom Italia’s fixed-line network, which is backed by some core investors as a way to raise badly needed cash, and by the Italian government as a means to speed up broadband investment.

“I believe this is a catastrophe,” Sawiris said. “If Telecom Italia does that, they will lose the only differentiator they have left in the telecom market in Italy.”

Sawiris has run into opposition from large Telcom Italia shareholders, including Telefonica(TEF), and Telecom Italia has rejected his proposal. Still, Telecom Italia’s board voted last week to explore a spinoff, though Chairman Franco Bernabe said it would proceed only if there were “significant regulatory advantages”.  In any event, it doesn’t look like a spinoff here would result in a distribution of shares to Telecom Italia shareholders. Most likely, an outside investor would take a stake, giving Telecom Italia cash and leaving it with a controlling interest in the fixed line firm.

 

Disclosure: The author holds no shares in any stock mentioned

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