Dubai: Egyptian entrepreneur Naguib Sawiris aims to shake up debt-laden Telecom Italia and steer it towards expansion in Brazil if shareholders warm up to his proposal for a three billion euro ($3.9 billion) cash infusion.
The billionaire tycoon, who got to know Italy well when he owned the third-biggest mobile operator Wind, has put on the table a capital increase that could make him one of the biggest shareholders in Telecom Italia. Details on the structure of the proposed transaction are scarce, but Sawiris told Reuters that he proposed that the capital increase be open to all shareholders, not just himself, and that it should be conducted around the current market price of 0.70 euros per share.
That is likely to draw the ire of other Telecom Italia shareholders, including Spain's Telefonica and the three Italian financial institutions who together own 22.4 per cent via an unlisted holding company called Telco. They value Telecom Italia at 1.50 euros per share in their accounts, and Marco Fossati, whose family's Findim Group owns five per cent of the Italian operator, on Monday said 1.50 was the "correct price" for any capital increase.
Sawiris, going against a trend of retreating investment in crisis-hit southern Europe, said he might also bring in some of his old Wind associates to put Telecom Italia back on the path to growth. "This proposal will provide a more stable financial structure for Telecom Italia going forward, more growth in Latin America and Brazil, and improved management through the infusion of people who have an excellent knowledge of the Italian market," Sawiris said.
Sawiris initially approached Telefonica and the other shareholders in Telco about the possibility of carrying out a capital increase at the holding company level. He was rebuffed, so decided to approach the Italian group directly. 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." Telecom Italia is now in talks with an Italian state-backed investment fund over such a spin-off. Under the plan, the fund would take a minority stake in the new company in exchange for Telecom Italia effectively becoming a wholesaler of broadband capacity to other companies.
Proponents of the spin-off argue the move would help Telecom Italia reduce debt while accelerating the modernisation of the woeful Internet infrastructure in Europe's fourth-largest economy.
Telecom Italia's board will meet on December 6 to discuss the network spin-off and whether to bid for Vivendi's GVT, a broadband specialist in Brazil, to complement its TIM Brasil mobile business unit in the fast-growing market.