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. Last Updated: 07/27/2016

Telecom Italia Considers Sale of Mobile Unit TIM

MILAN, Italy -- Telecom Italia's board was set to meet late Monday to discuss restructuring Europe's fifth-largest telecoms company in a strategic about-face that could lead to the sale of mobile unit TIM for 35 billion euros ($44.51 billion).

Telecom Italia eventually plans to sell part or all of TIM to focus the group on broadband and content, two sources close to the operation have said.

That would mark a major shift for Telecom Italia, which for the past two years has focused on integrating its mobile and fixed-line phone operations with content distribution.

Last year, Telecom Italia delisted the mobile company from the stock market.

Telecom Italia's "management runs some reputational risk in jettisoning 'convergence' a little over a year after the completion of the TIM buy-in," Morgan Stanley analysts said in a note Monday.

A spokesman for Telecom Italia said the board would not discuss the sale of any businesses at the board of directors meeting late Monday. Shares of Telecom Italia were suspended from trading Monday ahead of the board meeting.

Chairman Marco Tronchetti Provera has amassed around 41.3 billion euros in debt at Telecom Italia -- roughly the same as its market worth -- as he added borrowing to buy TIM to his leveraged buy out of the indebted fixed-line company in 2001. At the same time, Tronchetti, who is also chairman of conglomerate Pirelli, has seen the telecom's shares fall to about half the price he paid five years ago.

Telecom Italia is in talks to forge an alliance with Rupert Murdoch's News Corp. -- a tie-up that could help the Italian company move towards becoming a media group. That could boost its shares as media companies' valuations are twice as high as those of telecoms firms.

But Morgan Stanley's analysts caution that Telecom Italia's media operations are too small to make up for the declining margins of its fixed-line business. Tronchetti is under pressure from allies to cut their losses, particularly from the Benetton family, the owner of 20 percent of holding company Olimpia, which controls Telecom Italia with an 18 percent stake.

Pirelli owns 70 percent of Olimpia. If Tronchetti manages to sell part or all of TIM for cash, he may reduce Telecom Italia's debt and pass a sizeable dividend to Olimpia and Pirelli.