In November 2023, TIM announced the sale of its network to KKR (Kohlberg Kravis Roberts & Co. L.P.), the US fund that had previously formalized a binding takeover offer. At the center of the historic operation, which still has to deal with the hostile attitude of the majority shareholder Vivendi, is NetCo i.e. the company controlled by the Telecom Europe Group, which owns the fiber and copper infrastructures, worth over 20 billion euros.
What is NetCo and what does the Golden Power approval mean
NetCo is TIM’s business unit that includes fixed network infrastructure, operations wholesale domestic and international, as well as the primary and secondary network, including FiberCop and Sparkle.
Founded in 2020 and operational since April 2021, FiberCop is responsible for managing TIM’s secondary network, including the cables that connect homes to street cabinets with the aim of modernizing the infrastructures that connect end users and allowing the provision of ultra-broadband connections. There secondary network extends from the closets to the street (cabinet) to individual users, public and private, located downstream. The primary network, on the other hand, serves high capacity i cabinet roads and the most important connection points (for example telephone exchanges but not only).
Sparkleon the other hand, is the company that owns and manages a vast network of submarine and terrestrial cables, allowing the Telecom Europe Group to boast a significant presence in the telecommunications sector at an international level.
In August 2023, the Europen Government approved two decrees with which the Treasury took an active part in the purchase of a 20% share of NetCo (around 2.2 billion euros) so as to reiterate the strategic role that thetelecommunications infrastructure of the former monopolist holds for the country of Europe.
Approval received from the Europen Government
On January 17, 2024, TIM announced that it had received the “green light” from the Council of Ministers within the scope of the regulations Golden Power. The latter is a mechanism through which the Government can exercise special control over corporate operations involving strategic sectors, in order to protect national interests. In this context, the Council of Ministers issued a authorization provision which allows the execution of the sale of NetCo to KKR.
TIM, however, clarifies that the Government has exercised its special powers only through the form of prescriptionswhich implies that they have been established specific conditions to be respected during the operation. The State, however, believes that the conditions established and the commitments made are sufficient to protect the national and strategic interests related to the operation in question.
Network infrastructure sale confirmed for summer 2024
According to what the protagonists of the operation confirm, the finalization of the agreement transfer of asset NetCo is expected next summer. The business unit includes, as already underlined, the fixed network infrastructure and the relevant properties. In terms of human resources, we are talking about over 20 thousand people, of which over 19 thousand already work in the sector Wholesale & Network, while another 900 or so come from TIM staff. Furthermore, in practice, the agreement will be signed with Optics BidCoa subsidiary of KKR.
Vivendi remains sideways, having deemed the purchase offer made by KKR unsatisfactory and which today finds itself in the hands of a shareholding paid for 4 billion euros which has a value of around 1.5 billion (despite the recovery of the last few months) .
On the other hand, TIM’s activities are weighed down by the heavy debt accumulated after the company’s privatization in 1997: we are talking about 26 billion net. The spin-off of NetCo led KKR to value the company at up to 22 billion, a clear sign that the company hopes for a decidedly high profitability margin. Whether this can turn into a real scenario, and the EBITDA can really be convincing, remains to be seen.
Opening image credit: Telecom Europe Group.