Telecom Italia CEO says asset disposals needed to cut debt

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By Giuseppe Fonte and Elvira Pollina

ROME (Reuters) -The head of Telecom Italia (BIT:TLIT) (TIM) said the company needs to sell assets to cut the debt at Italy's biggest phone group after a sale of its landline grid to state lender CDP was put on hold by the new government.

The mooted multi-billion deal, part of a wider project to create a unified Italian network company combined with CDP's broadband unit Open Fiber, was a focal point of CEO Pietro Labriola's strategy to break up TIM into several units and shrink its 25-billion-euro ($26.4 billion) debt pile.

"We cannot solve Telecom Italia's debt issue organically, we need to sell assets," Labriola said during an industry conference in Rome on Wednesday.

Italy's government will on Thursday launch talks with leading TIM investors Vivendi (OTC:VIVHY) and CDP to identify "the best market-friendly options" for TIM as it seeks to win control of its landline grid, an asset seen as strategic.

Sources have told Reuters last week that Labriola, who is under pressure to revise his strategy, has been sounding out investors' interest in the assets of the former phone monopoly, working in particular with U.S. fund KKR as he prepares for any outcome of talks within the government.

The U.S. fund, which already owns a stake in TIM's last-mile network and had an attempt to take over TIM as a whole rejected this year, has recently renewed its interest in tightening its grip on TIM's landline grid, the sources said.

Labriola also said that the crowded Italian mobile market needed consolidation.

His sentiment was echoed by the head of the Italian unit of French telecoms company Iliad, Benedetto Levi, who said that the group, already present in Italy, was ready to play an active role in any consolidation process in the Italian telecoms sector.

TIM has also had contacts with other potential investors interested in buying into its domestic service operations, including French telecoms group Iliad and Poste Italiane, sources told Reuters last week.

Any deal involving foreign investors and TIM assets will be subject to government scrutiny under "golden power" regulation, which gives Rome the possibility to block the transaction.