Telecom Italia plans data centre spinoff and IPO
MILAN: Telecom Italia SPA plans to spin off its 23 data centres in Italy and list them on the stock market in a deal that could value the business at around 1 billion euros ($1.1 billion).
Chief executive officer Luigi Gubitosi wants to create a separate unit for the facilities in the first half of next year and bring in financial investors to improve their growth prospects ahead of the initial public offering, according to people familiar with the matter. Telecom Italia would keep overall control of the new unit, they said.
It’s the latest sign that phone companies are struggling to keep their data centres competitive as US tech giants such as Microsoft Corp. and Alphabet Inc’s Google roll out a new generation of huge, efficient server farms.
A partial sale would help Gubitosi to cut the former monopoly’s 29 billion-euro (Us$32bil) debt pile -- one of the biggest in the European telecommunications industry -- and share the burden of future infrastructure spending. Telecom Italia is already collaborating with industry rival Vodafone Group Plc on rolling out fifth-generation mobile services in Italy.
It’s valuing the data centres at between 12 times to 18 times their earnings before interest, tax, depreciation and amortisation, said the people, who asked not to be identified as the plans aren’t public. The business could be worth around 1 billion euros, based on the value of recent similar deals, they added. Telefonica SA agreed in May to sell 11 data centres to Asterion Industrial Partners for 550 million euros.
A spokesman for Telecom Italia had no immediate comment.
The spinoff plan is part of Gubitosi’s wider effort to drag Telecom Italia out of a steady decline that pushed its shares to record lows this year.
He’s also seeking a merger of its biggest asset -- Italy’s dominant fixed-line network -with rival Open Fiber SPA.
Gubitosi’s plan would replicate what Telecom Italia did with its wireless towers, hiving them off into a new unit called Inwit and listing it on the Milan Stock Exchange in June 2015. Since then, Inwit shares have more than doubled.
The company wants to maintain control over the new data centre business and will keep the operations in Italy for security reasons, the people said.
European telecom companies see their ability to keep sensitive client information inside national borders as a competitive advantage over rival services offered by the US cloud computing giants.