Telecom Italia is bracing for another boardroom brawl after CEO Luigi Gubitosi informed them he was willing to resign if it sped up their decision on KKR’s purchase proposal.
Telecom Italia (TIMboard )’s of directors will meet at 1400 GMT on Friday to address the impact on earnings of a soccer rights contract that has failed to boost income and contributed to two profit warnings at Italy’s largest phone firm since July.
On Thursday, TIM’s auditors reviewed the 1 billion euro deal Gubitosi negotiated with DAZN to stream Italy’s top-tier soccer matches, and two sources close to the situation told Reuters that they highlighted new concerns.
According to one of the insiders, a further reduction to TIM’s financial prognosis is not out of the question. TIM is burdened by debts that are almost four times its core profit.
S&P downgraded the company’s debt rating, which was previously classed as “junk,” last week.
Another two persons familiar with the situation stated that KKR, a private equity group based in the United States, raced to submit an offer following the downgrading, and that TIM was in danger of breaching bank covenants.
Gubitosi, who has been under fire from TIM’s largest shareholder, Vivendi, has offered to relinquish his managerial duties without standing down as a director.
That means his responsibilities must be transferred to another director, or a board member must retire to make room for a new CEO.
In a letter to the board, a copy of which was seen by Reuters, Gubitosi criticised directors for stalling on KKR`s offer to please some of the group`s shareholders.
STRATEGIC ASSET
The spat between Gubitosi and Vivendi is the latest in a string of boardroom squabbles at TIM, which has had three CEOs since 2015, when the French media firm began building its 24 percent share.
Gubitosi denied being close to KKR in the letter, and requested the board to provide the New York-based firm access to corporate data and nominate consultants.
On Sunday, TIM’s board of directors first considered KKR’s non-binding proposal to take the company private for 10.8 billion euros ($12 billion).
KKR has requested a four-week due diligence review after valuing TIM at 33 billion euros including net debt.
Gubitosi originally brought KKR on board last year, completing a 1.8 billion euro transaction in which the fund received a 37.5 percent share in TIM’s so-called last-mile network, which extends into people’s homes.
The acquisition offer for TIM as a whole comes as Italy prepares to invest 6.7 billion euros from the European Union’s recovery fund to accelerate the development of ultra-fast internet across the country.
The fixed network of TIM, which the government wants upgraded to fibre, is Italy’s key telecoms infrastructure, and Rome has stated that its stance on the KKR proposal will be determined by plans for the network.
Rome has special powers to block moves on strategic companies such as TIM but the executive of Prime Minister Mario Draghi has hailed KKR`s interest as good news for Italy.
Sources have said KKR, which consulted the government before tabling its proposal, plans to carve out the network and give state investor CDP – currently TIM`s second-biggest shareholder – a leading role in overseeing the asset.
