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Sources suggest that the plans to fortify TIM’s financials, including the separation of its infrastructure and service units, could include up to 8,000 job cuts
Back in November, US investment firm KKR approached Italian incumbent operator TIM, offering €10.8 billion to take control of the business.
The offer came following the latest profit warnings issued by the operator, which has found itself battling for slim profits in a highly competitive domestic market while also rolling out expensive 5G and fibre networks in recent years.
The offer from KKR was quickly followed by the stepping down of TIM’s CEO, Luigi Gubitosi, with the operator’s largest shareholder, Vivendi, pushing hard for a strategic reshuffle that would stabilise the business’s finances.
Vivendi had argued the KKR’s takeover offer was too low and did not accurately reflect the value of the company’s various infrastructure assets.
At the end of last month, TIM’s new CEO was officially announced as Pietro Labriola, previously the CEO of TIM Brasil. With backing from Vivendi, Labriola quickly drew up a plan to turn TIM’s fortunes around – a plan which reportedly included splitting the company’s domestic business into an infrastructure arm and a service arm, hoping to better unlock the value of its network infrastructure.
The new NetCo would include all of TIM’s fibre and copper infrastructure, as well as its submarine cable arm, Sparkle. The service unit, meanwhile, would include the company’s portfolio of products, including connectivity and cloud offerings, and would also include TIM’s Brazilian operations, according to sources.
This plan was presented to TIM’s Board on Monday, with sources suggesting that TIM will mull over its strategic options until at least the end of the month before responding to the KKR offer.
If the split does come to pass, the deal could open the door to the country’s controversial single network plan, which would see TIM’s fixed broadband network assets merged with those of its rival Open Fiber to create a national network. Proponents of the move have said this would accelerate the country’s fibre rollout and reduce overbuild, while detractors say the move would reduce competition and return the country’s broadband market to a monopoly.
There could be yet more implications for the scale of this reshuffle, however, with Bloomberg today reporting that this plan could include dramatic job cuts, with sources suggesting up to 8,000 of TIM’s roughly 40,000 Italian staff could be at risk.
Naturally, labour unions are strongly opposed to the spinoff plans, arguing that to do so would be a strategic misstep.
“The network spinoff is a mistake in every respect and all Europe’s largest phone carriers are continuing to own the most valuable piece of infrastructure, the grid,” a group of unions wrote on Monday in a letter to Prime Minister Mario Draghi.
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