TIM CEO says asset disposals needed to cut debt as network deal paused

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By Giuseppe Fonte and Elvira Pollina

ROME (Reuters) -Telecom Italia (TIM) needs to sell assets to cut its debt, its boss said on Wednesday, after a sale of its landline grid to state lender Cassa Depositi e Prestiti (CDP) was put on hold by the new government.

The mooted multi-billion grid 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 (BIT:TLIT)'s debt issue organically, we need to sell assets," Labriola said during an industry conference in Rome.

Prime Minister Giorgia Meloni's administration will on Thursday start talks with leading TIM investors Vivendi (OTC:VIVHY) and CDP to identify "the best market-friendly options" for TIM.

The government wants to secure control of TIM's grid, an asset deemed of strategic importance, to create a wholesale-only broadband player, cabinet undersecretary Alessio Butti said at the same event.

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, sources told Reuters last week.

KKR, 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.

KKR held exploratory talks with government officials over a plan, dubbed 'Project Rome", envisaging a vehicle including CDP or another state entity and the U.S. fund buying a 51% stake in TIM's access network, according to people familiar with the matter.

TIM has held a meeting with representatives of Global Infrastructure Partners to discuss a potential investment by the fund into its landline grid, a source with knowledge of the matter said on Wednesday.

The government still needs to find a common position on TIM, officials have 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 active in Italy, was ready to play an active role in any consolidation process.

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