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BT pressured to cut price to sell troubled Italian business - sources

By Pamela Barbaglia, Stephen Jewkes and Agnieszka Flak

LONDON/MILAN (Reuters) - BT Group may have to cut the price tag of its troubled Italian arm as bidders are mainly interested in parts of the business rather than the whole division, which suffered an accounting scandal in 2017, sources told Reuters.

Four bidders, including Telecom Italia (TIM) and telecom services provider Retelit, have been shortlisted to carry out due diligence on the business, two years after the accounting problems forced BT to take a 530 million pound write-down.

Mobile operator Wind Tre and voice and data provider VueTel are also taking part in the second round of the auction while Vodafone has walked away, the sources said.

Indicative bids fell short of BT's expectations, the sources said, and bidders were still assessing the merits of buying the business in the light of the accounting scandal.


BT Group, Telecom Italia, Retelit, Wind Tre and Vodafone declined to comment while VueTel confirmed interest in the process.


BT Italia reported overall debt of 509 million euros for the financial year ending in March 2018. The Italian business's overall sales fell more than 20 percent to 669 million euros between 2017 and 2018.


"There is a disconnect on price and none of the bidders would go crazy to buy this business," one of the sources said.

He said Retelit would gain the most strategic advantage by taking on BT Italia's corporate client network and the deal would be a "game changer" for the Milan-based company, but management was still aiming to buy it on the cheap.

Binding bids for the business are due at the end of March and some bidders including Telecom Italia are only targeting specific assets, a second source said.


A third source familiar with the matter said Retelit had yet to decide whether to bid for all or part of the business, pointing to declining sales as a major deterrent.


Credit Suisse, which is handling the sale, has been trying to lure all the main telecoms firms active in Italy to the negotiating table since September.


But interest remains lukewarm and no one is willing to rush on this deal.


"It's a soft process because it requires plenty of due diligence," the first source said.


BT Italia employs more 800 people and serves about 80,000 corporate clients in Italy including insurer Assicurazioni Generali and fashion house Armani.

BT former boss Gavin Patterson, in charge during the accounting scandal, stepped down on Jan. 31 handing over to Philip Jansen.

Jansen, a former Worldpay chief executive, will need to see through a major restructuring of the whole group to cut costs and tackle financial and operational underperformance.


(Additional reporting by Andres Gonzalez. Editing by Jane Merriman)