Exclusive - Tim's Top Investor Vivendi Seeks 31 Billion Euro Landline Grid Valuation - Source

Telecom Italia's (TIM) top investor Vivendi wants the phone group to value its fixed landline network at 31 billion euros ($33 billion) in any sale, far above analysts' and TIM's own estimate, a source close to the French group said.

Vivendi's stance could potentially make it harder for TIM to reach a deal to sell its network, a possibility the former phone monopoly is currently exploring in discussions with its second biggest investor, state lender CDP.

Speaking anonymously because deliberations are private, the source said Vivendi believed a sale had to meet certain criteria in the interest of all of TIM's shareholders.

In particular, 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.

Shares in TIM extended gains after the report and closed up 2.6% against a 1% 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.

SEPARATION

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 is discussing the potential sale with state lender CDP after they signed a non-binding accord last month 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.

Discussions involve also infrastructure funds Macquarie and KKR which would also need to back a deal.

Macquarie is a minority investor in Open Fiber.

New York-based KKR, which last year offered to buy the whole of TIM for 33 billion euros including debt but was rejected, holds a stake in TIM's last-mile network.

Both funds would remain as minority investors in the TIM-Open Fiber single network operator.

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.

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)