Telecom Italia working on new investor: source

MILAN (Reuters) - Telecom Italia TLIT.MI is working on securing a new investor, possibly from the Gulf, as well as splitting off its fixed-line unit, a source close to the issue told Reuters on Wednesday.

The source’s comments followed Italian newspaper reports that Europe’s fifth-biggest telecommunications company by market value was looking for fresh capital as it labors under 37 billion euros ($52.53 billion) in long-term debt and falling profits.

With the share price near a 10-year low, Chief Executive Franco Bernabe has been under pressure since laying out a go-slow business plan in March that included cutting costs and improving the quality of service.

Telecom Italia “is working on the entry of a new partner and on the splitting off of the fixed network” to a new company, the source, who spoke on condition of anonymity, told Reuters.

“The investor could be Libyan or (Gulf) Arab,” said the source.

The source said nothing definitive on these issues was expected from a board meeting on September 25.

Telecom Italy's share price has fallen by more than half since a consortium that includes Spain's Telefonica TEF.MC took control in April 2007. The number-two shareholder, Italy's Fossati family, has backed off from calling for Telefonica to take over the company, saying the conditions were not right.

In a bid to inject new funds, Telecom Italia was weighing a capital increase of about 3 billion euros, with Libya’s Lafico fund taking a stake of 5 to 6 percent at a price of 1.6 to 1.7 euros a share, Il Messaggero newspaper said on Wednesday.

The company also could sell off part of its fixed-line network for another 3 billion euros, it said, without citing sources.

La Stampa newspaper said Arab investors could take a stake of 5 percent to 10 percent. The phone company was in contact with the sovereign funds of Kuwait, Qatar and Saudi Arabia over the summer and Libya could also be a possible investor, it said.

Telecom Italia was not immediately available to comment.

An official at the Libyan Investment Authority said: “I really cannot comment on that at this stage.”

Telefonica declined comment.

On Tuesday, the company described as “journalistic speculation” media reports that the September 25 board meeting would include discussion of its industrial plan and possible asset sales.

It also said no business plan announcement would come before year’s end.

In a research note, Exane BNP Paribas said a split-off of the fixed-line network was unlikely and Telecom Italia’s management and some shareholders, including Telefonica, opposed it.

Telecom Italia shares pared gains to be up 3.19 percent at 1.099 euros at 1124 GMT as the DJ Stoxx telecoms index .SXKP was 0.56 percent higher.

Additional reporting by Tom Pfeiffer in Rabat and Robert Hetz in Madrid; writing by Ian Simpson; Editing by David Cowell