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Telecom Italia working on new business plan as assesses KKR offer - sources

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MILAN, Jan 4 (Reuters) - Telecom Italia (TIM) (TLIT.MI) is working with banks to draw up a new business plan that could involve spinning off assets as it studies options to help assess a buyout offer from U.S. fund KKR (KKR.N), two sources familiar with the matter said on Tuesday.

Debt-laden TIM received a non-binding buyout approach from KKR in November that indicatively valued the former telephone monopolist at 33 billion euros ($38 billion) including debt.

But a power vacuum prompted by the ousting of Chief Executive Luigi Gubitosi following a series of profit warnings last year has delayed the group's response to KKR, which has requested access to company data before making a formal bid.

KKR's offer is conditional on backing from the company's board and Italy's government, but TIM's biggest shareholder Vivendi (VIV.PA) has said it does not reflect TIM's value.

The new three-year plan, which will be drawn up on a standalone basis, will consider a series of options to boost value such as spinning off assets including its strategic network business, the sources said.

TIM, which has named Goldman Sachs and LionTree as advisers to assess the KKR offer and other options, has brought in Italy's Mediobanca and Vitali & Co to help out with the plan, the sources added.

TIM's fixed line network is the group's most prized asset and there have been calls from its No. 2 shareholder, state lender Cassa Depositi e Prestiti (CDP), to rekindle a stalled plan to merge the network with fibre optic rival Open Fiber to boost returns and avoid duplicating investments.

CDP owns 60% of Open Fiber.

On the KKR offer, CDP is working with Credit Suisse, Italy's Treasury with Lazard and Vivendi with Rothschild, the sources said.

TIM is expected to approve the guidelines of its new plan at a board meeting scheduled for Jan. 26, one of the sources said.

TIM, which still needs to find a replacement for Gubitosi, has mandated head hunter Spencer Stuart to find a new CEO and the process is expected to be finalised in January.

Pietro Labriola, the head of TIM's Brazilian business who was appointed general manager in November, is considered a leading candidate, sources have said.

Reporting by Elvira Pollina and Stephen Jewkes Editing by Mark Potter
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