The arrival of important news has been in the air for some time now. Thus, the Board of Directors TIMmeeting under the chairmanship of Salvatore Rossi, decided to sell the fixed network to the US fund KKR (Kohlberg Kravis Roberts & Co. L.P.) by accepting the binding offer made in mid-October. The news is important because TIM effectively gives up all its “endowment” in terms of fiber infrastructure e copperworth over 20 billion euros.
What is NetCo, the subject of the TIM KKR agreement
In 2021, TIM announced plans to sell its fixed-line assets in order to reduce debt. NetCo is the company created by the Telecom Europe group to manage the fixed network and exercise direct control over the management of the Sparkle submarine cables. In August 2023, the Europen government approved two decrees allowing the Treasury to acquire a 20% stake in NetCo, worth approximately €2.2 billion. The objective, with the acquisition of the minority share, was to reconfirm public control over some crucial choices regarding an infrastructure considered strategic for the country.
The agreement signed with KKR means that the overseas fund takes control of NetCo, a company which also includes FiberCop, the wholesale which is responsible for updating the network to bring the FTTH connectivity along the Peninsula.
How much is KKR’s acquisition of the network worth?
KKR’s binding offer values NetCo (excluding Sparkle) at 18.8 billion euros, without considering any increases in value resulting from additional conditions that could raise the final figure of the transaction up to 22 billion euros. The move into KKR’s portfolio Europen telecommunications network and Sparkle intercontinental connectivity should take place by summer 2024 (without prejudice to all checks that the relevant authorities will conduct) passing through Optics BidCoa company directly controlled by KKR.
Rossipresident of TIM, states that “the transfer of the network an infrastructure investor like KKR has also found the appreciation of the Government, which will support this operation with huge resources; restores growth prospects to the TIM Group. The new TIM of servicesfreer from financial burdens and stronger on the market, will be able to contribute to developing that capacity for innovation which is fundamental to accompanying families, businesses and public administration towards a totally digital future“.
The result of two years of work, the agreement with KKR gives, second Pietro LabriolaCEO of TIM, new “lifeblood to the network infrastructure and at the same time allows TIM to focus on the technological innovation needed to govern the complex digital services market and play a leading role“.
The resistance of Vivendi, TIM’s main shareholder
The sale of NetCo to KKR should help TIM, as mentioned, reduce its debt and focus on its core activities. VivendiTIM’s largest shareholder, which has a share of around 24%, immediately got in the way by opposing the agreement and complaining about the lack of consultation with shareholders.
The French giant branded the decision of the TIM Board of Directors as “illegitimate”, speaking of a violation of investors’ rights. For this reason, Vivendi has already threatened to use every tool useful to protect the rights of the company and those of all shareholders.
In the past, Vivendi had indicated that KKR’s valuation was undersized: the French group argued that the assets of the former monopolist which were the subject of the agreement could not be sold for less than 30 billion euros.
The project of a single network is on the horizon
At the moment there are two operators that deal with network infrastructures in Europe. On the one hand there is TIM-NetCo, which should in fact pass under the aegis of KKR, on the other Open Fiber which in August 2021 saw the “exit” of Enel with the transfer of company shares to the Australian fund Macquarie Asset Management. Currently, ownership of Open Fiber is shared between the state finance company Cassa Depositi e Prestiti, with a 60% stake, and Macquarie (40%).
Open Fiber it does not directly sell ultra-broadband network services to private individuals, businesses and the Public Administration, but is responsible for building and updating the fiber network in its entirety and then granting its use to partner companies.
The sale of TIM’s fixed network to KKR does not have a direct impact on Open Fiber. However, in the future the plan that envisaged the creation of one could become very relevant again single national network following the merger between the assets of the former monopolist and those created in recent years by Open Fiber. There is obviously nothing on the table and we are still in the realm of simple hypotheses (on the other hand the closing of the TIM KKR agreement is not yet defined, also given the fuss raised by Vivendi). Nonetheless, the objective – also examining the many declarations of the “parties involved” which have followed one another over a very long time window – could be to create a single network operator for the entire Europen territory controlled by Cassa Depositi e Prestiti and shared by foreign funds.