The 62-year-old, who has run telecommunications carriers on three continents, is seeking almost $10 billion in financing to bid for a stake in Telecom Italia SpA (TIT), according to people familiar with the matter. While sovereign-wealth funds in Qatar and Abu Dhabi are among investors said to have expressed interest, it remains unclear whether Trujillo can raise enough funding and if Italy’s government would welcome the approach.
The proposal, dubbed “Adriano,” after a Roman emperor, would foresee Trujillo taking over as CEO and bringing in managers to Milan-based Telecom Italia, according to confidential documents detailing the project. Trujillo has discussed the plan with
New York-based financial advisers, but he hasn’t approached Telecom Italia’s board or executives because the bid isn’t fully funded, the people said, asking not to be named because the deliberations are private.
Trujillo “needs to prove that he has the firepower to invest in an indebted company like Telecom Italia,” said Carlo Alberto Carnevale Maffe, a professor of business strategy at Milan’s Bocconi University.
Former Telstra Corp. Chief Executive Officer Sol Trujillo is seeking to raise as much... Read More
Net Debt
Telecom Italia shares rose as much as 1.4 percent and traded 0.9 percent higher at 92.3 euro cents as of 9:15 a.m. in Milan. They had gained 29 percent this year through yesterday and more than 40 percent since Marco Patuano became CEO a year ago.Now, an investment of 7.5 billion euros ($9.6 billion) would be equivalent to almost half of Telecom Italia’s market value. Telecom Italia, whose rating was cut to junk last year, had net debt of $35 billion as of June 30. While details of the plan are still being worked out, Trujillo’s investment could take the form of a proposed capital increase or buying Telecom Italia shares on the market, the people said.
Trujillo got his start at AT&T Corp., then known as Ma Bell, before its 1984 breakup. He eventually became CEO of US West, one of the seven Bell operating companies. Following US West’s agreement to be purchased by Qwest Communications International Inc., Trujillo in 2000 quit the merged company, citing differences with Qwest’s CEO and over management and operations.
Telstra Lessons
Trujillo later ran French mobile-phone operator Orange for a year. After Orange’s takeover by France Telecom SA, Trujillo in 2005 became the CEO of Melbourne-based Telstra, from which he resigned in 2009 after a tenure marked by clashes with the Australian government over telecommunications regulation.This time, Trujillo knows the importance of state backing. Since May this year, representatives of Trujillo’s group and Italian officials including Antonello Giacomelli, an undersecretary at the Economic Development Ministry who is responsible for communications policy, have held confidential meetings over the project, said the people.
Senior officials are aware of Trujillo’s plan and the government is open to the idea of a foreign investor, the people said. A government representative declined to comment.
Still, after Bloomberg News broke the story yesterday, Giacomelli said in an e-mailed statement that Italy’s government has the veto rights over strategic businesses.
Veto Power
“Italy’s government has just one reason to take interest in a private listed company such as Telecom Italia, which is to protect the national interest with regards to security and the development of a strategic infrastructure which is the network. To that extent, we will consider using our golden power veto with everyone,” he said.In the past two years, Telecom Italia has attracted potential investors including Hong Kong billionaire Li Ka-shing and Egyptian tycoon Naguib Sawiris. However, the carrier remained under the grasp of Telco SpA, the vehicle created in 2007 to fend off a bid from AT&T Inc. and Carlos Slim’s America Movil SAB.
Telco’s shareholders -- Telefonica SA (TEF) of Spain, Mediobanca SA, Intesa Sanpaolo SpA and Assicurazioni Generali SpA -- are currently winding down the holding company that owns 22.4 percent of Telecom Italia.
Board Meeting
Trujillo declined to comment when reached by Bloomberg News. Representatives of sovereign-wealth funds in Abu Dhabi and Qatar declined to comment or didn’t respond to requests for comment.A spokesman for Telecom Italia declined to comment. The company’s board is meeting today to discuss a proposed delay of the sale its Argentine business to Mexican financier David Martinez. Last month, Telecom Italia lost out to Telefonica in a bidding war for Brazilian broadband provider GVT.
Under Trujillo’s plan, which calls for expanding an ultra-high-speed fiber network in Italy, Telecom Italia’s revenue would reach 26 billion euros by 2018, with earnings before interest, taxes, depreciation and amortization rising to about 11 billion euros and net debt falling to less than 16 billion euros, according to the internal documents dated August 2014.
Those forecasts imply sales increasing by about 5 percent a year, said Berenberg Bank analyst Paul Marsch. “There’s no telco in European telco land growing at revenues anywhere near 5 percent at the moment,” he said.
‘Good Chance’
Andrea Giuricin, a professor at Milan’s Bicocca University, said there is a “good chance” Trujillo could succeed, especially if he could win state-owned lender Cassa Depositi e Prestiti SpA on board in any deal.Trujillo views the proposed investment as a way to benefit from a Telecom Italia turnaround over time, rather than a short-term financial gain, the people familiar with the matter said. In addition to owning a national phone network, Telecom Italia controls Brazil’s second-largest wireless carrier Tim Participacoes SA.
“There are some important details we need to know,” said Berenberg Bank’s Marsch. “Do they know how to operate in the Italian market? Do they have the political backing? Would they manage to broker a deal with the regulator?”
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