Telecom Italia (TIM) announced that its directors approved the sale of a minority stake in its last-mile fixed network to US investment fund KKR Infrastructure during a board meeting in which they also backed a government plan to set up a single high-speed broadband network company with rival Open Fiber. The agreement with KKR will see the US firm take a 37.5 percent stake in TIM’s last-mile fibre and copper grid company FiberCop for EUR 1.8 billion, on the basis of an enterprise value of EUR 7.7 billion and an equity value of EUR 4.7 billion. That deal is expected to be the launching pad for the government’s plan to merge FiberCop with Open Fiber to create a single network operator.
Fixed-line network newco ‘FiberCop’
TIM confirmed it would hold 58 percent of FiberCop, KKR Infrastructure 37.5 percent and Fastweb 4.5 percent thanks to the latter’s holding in the Flash Fiber joint venture that will be folded into FiberCop. Tiscali is also on board as a strategic partner after signing an MoU with TIM last week. The former incumbent will be the exclusive supplier for the construction and maintenance of the networks and will provide additional services to FiberCop, which will have a streamlined structure with less than 100 employees. According to TIM, the fibre network rolled out by FiberCop will be developed on the basis of a co-investment model open to all other operators, in accordance with the provisions of the European Electronic Communications Code.
TIM said the FiberCop operation would speed up the migration of customers from copper to fibre as well as helping to reduce the digital divide in Italy. In that regard, TIM said FiberCop will bring FTTH at 1Gbps speeds to 76 percent of premises in “grey” and “black” areas, equivalent to 56 percent of the country’s premises, by 2025. In underserved “white” areas TIM will continue its current deployment of fibre to the cabinet (FTTC) technology at speeds of up to 200 Mbps. The transaction is expected to close in the first quarter of 2021, depending on regulatory approval from the competent authorities.
Letter of intent to create single high-speed network with Open Fiber
At the same time, TIM's board endorsed the signing of a letter of intent with CDP Equity to implement the government’s wider plan for a single national network via the merger of FiberCop and Open Fiber. The announcement confirms reports that the government’s ruling coalition last week approved a plan put forward by state lender CDP that would allow TIM to take majority ownership of a future single high-speed broadband network, whose governance would be strictly regulated by a reinforced telecom watchdog (Agcom) and shared among several stakeholders.
‘Majority ownership with shared governance'
In its statement, TIM said it would own at least 50.1 percent of the new entity dubbed "AccessCo" but that the independence and third-party status of the company would be guaranteed by a shared governance mechanism with CDP, which controls Open Fiber with state-backed energy giant Enel. “Qualified majority mechanisms and prior checking rules will be applied for this purpose,” it said, adding that third parties will be carrying out due diligence relating to FiberCop and Open Fiber to determine the values of the assets to be transferred to the new nationwide network entity.
The due diligence is expected to be completed by the end of the year with a view to reaching any merger agreement by the end of the first quarter of 2021 at the latest, again depending on prior regulatory approval, said TIM.
