Single network, debt reduction, valorisation of assets. Tim's long day, with the presentation of the plan for vertical “dis-integration”. which divides the group into two entities – the NetCo with the landline and the ServiceCo with all the rest – it's over and the spotlights on the company come down from the early hours of Thursday 7 July, the day of the eagerly awaited Capital Market Day. An appointment aimed at explaining the options opened up by Tim's great reorganization and at regaining the market's trust (+ 0,8 % late afternoon).
La single network with Open Fiber is the priority option, he explains to analysts and journalistsTo Pietro Labriola flanked by CFO Adrian Calaza, but if that fails there is also a plan B with the sale of NetCo to a financial operator. It is the chapter on which analysts insist the most in trying to understand the outcome of the negotiation underway with Cdp, Macquarie and Kkr. Now let's look at management's communications to the market point by point.
Tim and the single network: agreement or sale
”The interlocutions now continue, there are small discussions on minor elements that do not modify the negotiation. We are going through a compliance process, but still the process is continuing. The goal remains to get to the signing of binding agreements by October 31st 2022”. This is how Pietro Labriola explains the state of the art, admitting that there have been some small delays but that the negotiation is going ahead and the times are confirmed.
The combination with Open Fiber remains, for the separation of the Tim network, “thepriority option to unlock considerable synergies and allow the full exploitation of the network”, reads the plan. Option that stands “only if executed on terms that are advantageous for both equity holders and debt holders. In the event of failure to complete the transaction, the alternative options could include, among others, the potential sale to private market investors, given the proven propensity currently shown for such an asset class or a structural separation”. Plan B therefore does not exclude an M&A and CEO Labriola explicitly mentions the possibility of selling the network to a financial partner. On the other hand, Tim's whole plan was presented after Kkr put on the table the hypothesis of a takeover bid, now over, but still an indication of interest in the network.
With vertical separation, 11 billion of debt goes to the network
With the deconsolidation of the debt, linked to the abandonment of the current vertical integration model, approximately 11 billion would follow NetCo and would be deconsolidated from the Tim balance sheet.
Is the valuation of 31 billion circulated as a valuation of the NetCo (including debts) demanded by the shareholder Vivendi realistic? Labriola did not want to answer this question so as not to reveal the cards of the ongoing negotiations, he said, but specified that the enhancement must take into account numerous factors, including, for example, the introduction of a Rab to evaluate the infrastructure .
Demerger or carve out of assets? "The split is not the best way, we keep various scenarios open depending on how the negotiation proceeds to have a greater margin for negotiation", was the manager's response.
The date of 31 October 2022 has been confirmed as the deadline for the negotiation with Cdp based on the current memorandum of understanding, the timing of the division in the various business units is 15-18 months.
Tim bends over backwards, big customers will be the driving force
For Tim Enterprise (large clients and Public Administration plus Noovle, Telsy and Olivetti) strong growth in revenues is expected from 3 billion today to 5 billion in 2030 once the reorganization is completed. Doors open for new partners, Tim Enterprise is marked in the plan presented at Capital Market Day 2022 as eligible for M&A.
For Tim consumer (domestic customers, SMEs, mobile network) it is instead a question of stabilizing revenues at 6,5 billion in 2030. “In Italy we have the lowest prices in Europe, both on landline and mobile. It will be necessary to evaluate a sustainable business model in the medium-long term”, hoped the CEO, with an eye to the sector Authority and the need to rebalance the consumer-operator relationship. Khera and Timvision will re-enter Tim Consumer. The third rib of ServiceCo is Tim Brasil from whom the management expects a strong growth in value in terms of Ebitda.
The reorganization, in the vision of the Tim management, will have to bring more efficiency to the individual activities - especially Consumer. For now, the group confirms the exit of 5-6 thousand people pursuant to article 4 of the Fornero law (the same used up to now to encourage exodus) by 2024.
