COMMUNICATIONS: Reports Telecom Italia Is Considering Restructuring Divisions
TITIM Ba3[P]/BB/BB Curve Up To 30c Lower
Reports are light on detail though imply that Telecom Italia is considering their options on the future structure of the group.
- Messaggero reported on 31 Dec that Telecom Italia is evaluating splitting ops into two legally separate entities: Consumer with EUR 7bn revenue and EUR 1.2bn EBITDA, and Enterprise with EUR 3bn revenue and EUR 1bn EBITDA. The Brazil unit would remain independent within the TIM group.
- Such a separation could facilitate asset sales with a sale or carve-out of their Enterprise or Brazil units having long been speculated upon. TITIM previously expressed interest in a partial Enterprise deal; a 2022 non-binding bid from CVC for a 49% stake in TIM Enterprise implied a EUR 7bn valuation for the unit. Article postulates that CVC could eye consolidation with MaticMind.
- Again, the bond docs would not prevent such a deal. A formal separation of operating units could be read as implying intent for an outright Enterprise sale though this would be a departure from the 2022 proposal, and we don’t see the reports as indicating preference either way. Net debt has fallen to just EUR 8bn as of 9M24 on the KKR network sale though any excess proceeds could be used to fund buybacks of savings shares or expedite the return to dividends, though at the cost of a margin-accretive unit.
- We also note that such asset sales could be a means of reducing the leverage impact on TITIM’s consumer ops on any eventual takeover bid in line with recently reported interest from CVC/Bain in Vivendi’s TITIM stake though CVC’s 2022 bid would imply that they see value in the Enterprise unit.
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FRANCE: FRANCE: Next Steps For Budget As No Confidence Vote In Gov't Looms
If the gov't falls in a 3 Dec censure motion (no-confidence vote) the adoption of all parts of the budget - the Social Security Finance Bill (PLFSS), the draft finance law (PLF), and the end-of-management finance bill (PLFFG) - would come to a halt. In order to have a budget in place by year-end Article 47 of the constitution might be invoked. This provides for a gov't to enact a budget by ordinance without a vote if it is not passed within 70 days. However, it is unclear if this would be legally possible given that when a gov't falls, all of its bills also fall.
- If a new gov't cannot be formed immediately (given it took months to get the Barnier gov't into office this is a reasonable prospect) the caretaker gov't can submit a 'special law' under Art. 45 of Organic Law on Laws of Finance before 19 Dec that would allow the gov't to continue collecting taxes and continuing expenditure at current levels to keep the state running into the next year until a budget is approved.
- If this law is rejected, the options become even more stark. Under Article 16 of the Constitution if "the proper functioning of the constitutional public authorities is interrupted," the president may assume emergency powers that allow him to bypass the legislature. This would be extreme given that it would essentially represent a suspension of French democracy. Without such action, though, a US-style gov't shutdown would loom on 1 Jan.
FOREX: FX OPTION EXPIRY
Of note:
EURUSD 1.17bn at 1.0500.
EURUSD 1.23bn at 1.0500 (Wed).
AUDUSD 1.22bn at 0.6500 (wed).
EURUSD 1.54bn at 1.0500 (fri).
- EURUSD: 1.0470 (727mln), 1.0500 (1.17bn), 1.0550 (290mln), 1.0565 (530mln), 1.0580 (478mn), 1.0600 (333mln).
- USDCNY: 7.3000 (483mln).
US TSY FUTURES: Possible Short Cover Via TU Block
{US} US TSY FUTURES: Only real flow of note in early London dealing comes via a block of 3.8K TUH5 futures at 103-01.
- Looks like as buyer, could represent short cover after a block sale of the exact same size was logged in early London hours on Monday (would represent a small loss with the initial block lodged at 103-00).
