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TIM recovers from record lows with revival plans ongoing

Shares in Telecom Italia (TIM) recovered from record lows on Monday as the head of Italy’s biggest phone group met investors to convince them of the merits of his plans to revive the former phone monopoly.

The TIM roadshow comes ahead of a decision expected shortly from TIM on a 10.8 billion euro ($11.7 billion) takeover proposal which U.S. fund KKR made in November.

A board meeting to draw up a response to the KKR proposal could be held next weekend once TIM’s advisers complete their analysis to compare TIM’s planned in-house revamp with KKR’s plan, two sources said.

After losing some 30% of their value in the last two sessions of last week, TIM shares initially tumbled by another 10% to 0.22 euros on Monday, touching fresh record lows.

However, after a recovery, the stock was up over 4% in late morning trade in Milan against a 2% fall in Italy’s blue chip index The shares remain way below the 0.505 euro level at which the KKR approach was pitched.

Backed by Telecom Italia’s leading investor Vivendi, which billed KKR’s proposal as too low, CEO Pietro Labriola’s plan is centred around the structural separation of TIM’s fixed network business from its retail operations.

Last week Labriola said that KKR’s plan for TIM was similar but added he was convinced doing it internally could generate more value for investors, including minority shareholders.

However, a third source said some of Telecom Italia’s board of directors have reservations about ditching KKR’s proposal without exploring talks with the fund.

Labriola is holding face-to-face meetings with investors in Milan and would also give a series of teleconference briefings between now and Wednesday, the sources said.

Don’t panic
In a video message to the group’s 42,500 domestic staff over the weekend, Labriola, a veteran TIM executive who in January became TIM’s fifth CEO in six years, urged them not to panic.

Labriola called on TIM’s employees to focus on serving customers and take pride in TIM’s role as Italy’s main telecoms operator, and said a negative market reaction was no surprise given the company’s results.

Hit by stiff competition in its core domestic market as well as regulatory constraints, debt-laden TIM reported a record loss last year and said it expected a low-teens decrease in its 2022 core profit, based on the current group structure..

Labriola said last week he was convinced his plan to hive off TIM’s fixed network assets from retail operations would give the group more leeway to unlock TIM’s real value.

Under the planned overhaul, details of which would be fleshed out by June, TIM would create two separate entities, dubbed NetCo and ServCo, developing different business models, with the former focusing on wholesale-only network operations.

Such a set up could ease M&A deals, including a mooted combination of TIM’s infrastructure assets with those of state backed fiber optic firm Open Fiber, a move advocated by TIM’s second-largest investor CDP. Metro US

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