World Trade

Italy’s TIM plans to split up to reduce its debt.

ROME (Reuters) -Telecom Italia (TIM) said on Thursday that it was ready to sell its fixed network assets and separate them from its service businesses. This is part of a plan to reorganise the company and bring in new partners to help pay down its debt.

TIM is the heir to the former national phone monopoly. It has net debt of 24 billion euros, which is partly due to multiple leveraged buyouts, and its home market, which is very competitive, is causing its sales to drop.

Under TIM’s new strategic plan, which was released on Thursday, the Sparkle domestic fixed access network and submarine cable unit will be split off into a new company called NetCo. NetCo will take on up to about 11 billion euros of the company’s debt.

TIM is counting on this and other transactions, like the sale of a minority stake in the newly created enterprise services unit, to bring its net debt after lease down to below 5 billion euros from a pro forma level of around 20 billion euros in the first quarter.

As part of the plan to change things up, there may be a deal to combine TIM’s fixed network infrastructure with that of its smaller rival Open Fiber, which is owned by the Italian government.

“The combination with Open Fiber remains the most important/preferred option,” TIM said in presentation slides, “but only if it can be done on terms that are attractive to both equity and debt holders.” However, TIM did not rule out other possible options, such as the sale of minority stakes in NetCo.

TIM said that its service operations will include TIM Brasil, which is listed in Brazil, and domestic service activities, which will be split into two units with their own financial goals.

The enterprise company will offer cloud, cybersecurity, and Internet of Things businesses in addition to its consumer business.

“This business plan will allow (TIM) to improve operational performance with a specific economic and financial focus for each entity and to attract new industrial and financial partners,” TIM said.

($1 = 0.9799 euros)

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