Exclusive-TIM’s top investor Vivendi seeks landline network valuation of 31 billion euros-source

Telecom Italia’s (TIM) top investor Vivendi (OTC:VIVHY) wants its fixed landline network to be valued at 31 billion euros ($33 billion) in any sale, far higher than analysts and the telecom company had forecast, a source close to the French group said.

TIM’s landline grid should carry at least 10 billion euros of the company’s debt were it to be separated from the group’s services arm, the person said, asking not to be named because deliberations are confidential.

Shares in TIM extended gains after the report and were up more than 3% by 1132 GMT, outperforming a 0.6% rise in Italy’s blue-chip index.

Vivendi owns 23.8% of TIM and its support is important for any asset separation deal to go through. TIM declined to comment.

The comments come as TIM’s new CEO Pietro Labriola works on a revamp plan for the debt-laden phone group centred on the separation of its wholesale fixed network operations from its services businesses.

Labriola will present his strategy to investors on July 7.

As part of the plan, TIM is considering an outright sale of its domestic landline grid and its international cable unit Sparkle, sources have previously said.

TIM has signed a non-binding accord with state lender CDP – the second-biggest investor in TIM after Vivendi – to create a unified broadband champion in Italy combining TIM’s network assets with those of CDP-controlled rival Open Fiber.

CDP would control the combined network entity.

After opposing for years the idea that TIM could lose control of its main infrastructure asset, Vivendi has opened the door to supporting Rome’s efforts to create a single broadband operator under state oversight.

However, Vivendi CEO Arnaud de Puyfontaine has warned Vivendi would only back a sale of the network that valued it fairly, rejecting as inadequate analyst valuations for the grid of 17-21 billion euros before synergies.

The value is also far higher than a price tag for the business estimated by TIM of about 20 billion euros including debt.

Vivendi’s much higher valuation could potentially complicate reaching an accord with CDP and Open Fiber over the sale of the network.

The source close to Vivendi said the French media group was a long-term investor in TIM and, following a split, would focus its strategic efforts on the group’s services arm which it ruled out selling.

($1 = 0.9511 euros)