News: FGX UPDATE 1-Telecom Italia CEO says deals needed to cut debt mountain

(Adds details from analyst call)

Telecom Italia (TIM) TLIT.MI needs to take one-off measures such as selling assets to cut its debt and revamp its business, the head of the former national phone company said on Wednesday.

Chief Executive Pietro Labriola said TIM would not comment on a non-binding bid from KKR KKR.N for its landline grid until a board meeting scheduled for Feb. 24 to decide on the "next steps".

But he told analysts that TIM needed to take "extraordinary measures" to slash its leverage beyond what it could achieve by operational improvements.

Net financial debt stood at 25.4 billion euros ($27.2 billion) at the end of 2022, up by 3.2 billion euros from the year before.

Labriola was speaking after TIM late on Tuesday unveiled a new set of financial targets indicating a return to growth this year after its 2022 earnings fell less than initially feared.

TIM shares pared initial gains and were 0.5% up by 1200 GMT after rising over 2% during morning trade.

Hit by a steady erosion of earnings and sales over the past decade amid tough competition at home, TIM is seeking a turnaround centred on a sale of its prized landline grid to focus on its service operations.

KKR, already a minority investor in TIM's landline grid, this month offered to buy a controlling stake in a venture comprising TIM's fixed network and submarine cable unit Sparkle.

Two sources familiar with the matter said KKR values the venture at 20 billion euros, including an earnout of some 2 billion euros.

Labriola told analysts the company has other options to raise cash, including a sale of of a stake in its Enterprise business unit, comprising cloud and cybersecurity activity, adding "but clearly the focus is on Netco now".

TIM's second biggest investor, state lender CDP, is also studying an offer together with Australian infrastructure fund Macquarie (MQG) for an asset over which the government has special powers to block unwanted interest.

Last year TIM spent months negotiating a sale of its network to a consortium led by CDP aimed at creating a broadband champion combining its infrastructure with that of CDP's broadband unit Open Fiber.

But regulation and valuations issues have thwarted those efforts, with TIM's leading investor Vivendi VIV.PA seeking a price tag of 31 billion euros to back a sale, against a 17-18 billion euros valuation by CDP, according to sources.