Sunday, 03 July 2022

TIM–Open Fibre merger days away from agreement

by Harry Baldock, Total Telecom
Thursday 05 May 22

New TIM CEO Pietro Labriola has said he is confident a deal will be reached to merge the two largest fibre networks in Italy

After years of heated discussion, it appears that a deal to create a single national fibre in Italy could finally be on the horizon, with TIM CEO Labriola suggesting that a preliminary agreement to merge the company’s fibre assets with those of Open Fiber could be just days away. “There have been some delays... but stakeholders are interested in carrying out the project, I don’t see problems,” said Labriola at a press briefing on the company&rsquo…

After years of heated discussion, it appears that a deal to create a single national fibre in Italy could finally be on the horizon, with TIM CEO Labriola suggesting that a preliminary agreement to merge the company’s fibre assets with those of Open Fiber could be just days away.

“There have been some delays... but stakeholders are interested in carrying out the project, I don’t see problems,” said Labriola at a press briefing on the company’s quarterly results. 

The concept of creating a single, national fibre network in Italy has been in discussion for many years now. The Italian government has typically been a great supporter of the concept, suggesting it will allow for a faster, more efficient rollout, eliminating unnecessary overbuild, and presenting a more economical usage of EU recovery funds. TIM, on the other hand, has previously argued against the move, saying it would not give up control of one of its most valuable assets without getting a controlling stake in the resulting joint venture.

This impasse remained for the last two years, during which a change of national government and the onset of the coronavirus pandemic only served to further complicate the issue.

But in November 2021, at a time when TIM’s lacklustre financial performance was coming under fire from shareholders, US investment firm KKR offered to takeover the company for €10.8 billion. This bid spurred the accelerated resignation of TIM’s then-CEO Luigi Gubitosi, subsequently replaced by the previous head of TIM Brasil, Pietro Labriola. 

Labriola brought with him a plan to rejuvenate TIM’s financial position, including separating the infrastructure and service units. This separation would remove a major barrier for the merger of the fibre network unit with Open Fiber, reigniting discussions around the creation of a single network. 

It also sparked wider investor interest in TIM, both for the network and enterprise services arms. British investment firm CVC, for example, quickly submitted a non-binding proposal to TIM for the acquisition of a stake up to 49% in TIM’s enterprise services arm; estimates suggest the bid could be worth up to €5 billion.

Formal discussions with the Cassa Depositi e Prestiti (CDP), the state investment bank that holds a 10% stake in TIM and a 60% stake in Open Fiber, began last month. Around the same time, TIM officially broke off the takeover discussions with KKR, though noted that the firm could still be involved in the single network discussions. 

KKR already owns 37.5% of TIM’s ‘last mile’ fibre unit, FiberCop. 

Any deal that could see new investment flowing into TIM cannot come soon enough. Earlier this year, TIM reported a net loss of €8.4 billion for 2021, citing falling profits in its highly competitive home market. 

Late last month, TIM was reportedly in negotiations with a pool of banks, including UniCredit, BNP Paribas, Credit Agricole, and Santander, seeking to raise €3 billion in financing. According to reports, up to 80% of this total would be guaranteed by state insurer, SACE.

 

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