Telecom Italia Mulling French Unit Sale

Telecom Italia is considering selling its unprofitable French broadband unit, sources close to the situation told Reuters on Monday.

Telecom Italia has mandated Calyon, a unit of France's Credit Agricole, to organize the sale of the unit, known as Alice, the sources said.

The sale may be announced when the Milan-based company presents its industrial plan to analysts on March 7, the sources said.

A Telecom Italia spokesman declined to comment.

Telecom Italia aims to sell its French business because "its performance is not satisfactory," one of the sources said.

Alice is the group's only unprofitable broadband unit. It posted an operating loss of 147 million euros ($215.9 million) in the first nine months of 2007 on sales of 282 million euros.

French daily Le Figaro also reported the possible sale on Monday. It said Telecom Italia's French broadband unit could be worth between 600 million and 650 million euros based on the multiple used for the recent purchase of Club Internet by Neuf Cegetel.

Potential buyers Iliad and Neuf declined to comment on Monday but both companies have traditionally looked at rivals put up for sale and made informal bids, other sources said.

"The problem is that France's three big players, France Telecom, Iliad and Neuf have enough subscribers to be profitable and build up their business so they don't need Telecom Italia's subscribers but of course, as always, everything depends on price," one source close to Neuf said.

In 2005, the Italian operator aimed to grab a significant slice of the French broadband market and pledged to spend 150 million euros in marketing and 350 million euros in infrastructure in France over the next three years.

Shares in Telecom Italia were up 1.84 percent in morning trading, in line with the DJ Stoxx telecoms index.