FiberCop is taken off the case as investors get nervous
The battle over the future of Telecom Italia (TIM) has taken a new turn with US private equity fund KKR objecting to a plan to merge TIM’s FiberCop network with rival infrastructure builder Open Fiber. KKR has a 37.5% stake in Fiber Cop which it bought for €1.8 billion ($1.9 billion) in 2020. It has the power to veto any deal that is doesn’t add to the value of FiberCop, which would be included in any combined network entity with Open Fiber.
Missed deadline
In May TIM started formal talks with a state-owned bank Cassa Depositi e Prestiti (CDP) about its plan to create a single network project, but they missed their own deadline, on April 30, for creating a preliminary agreement. CDP owns 10% of TIM and 60% of Open Fiber. Last week TIM CEO Pietro Labriola was confident that an accord was within reach. However KKR has complicated the matter by asking for guarantees over the economic returns of any single network deal before giving its backing, according to Reuters’ sources.
Accordless
KKR had tabled a takeover bid, which was fought off by shareholders led by majority stakeholder French media giant Vivendi, which supported Labriola’s nomination for CEO. TIM is now pushing ahead with plans to split its domestic network from its service businesses. Under the scheme, TIM would relinquish control of Italy’s biggest telecoms network in favour of state lender CDP, making the state lender the main shareholder in any network combination between TIM and Open Fiber. KKR is concerned about the impact of antitrust remedies that EU competition authorities could impose to clear a tie-up, potentially reducing expected returns, the sources said.
Anti-trust fears
The Italian government wants an outcome that improves the state of the national infrastructure, giving its telcos greater economic impact while avoiding a costly duplication of investments. Reuters’ sources report that KKR argues that the project won’t be consistent with an EU-funded scheme to boost fibre optic rollout across Italy, or with TIM and Open Fiber standalone investment plans.
Love me tender
TIM and Open Fiber compete in government tenders to secure €3.8 billion ($4 billion) in EU recovery funds to ensure the whole of Italy can have 1 gigabyte per second fixed Internet connectivity by 2026. KKR has also argued that CDP needs to inject cash into any combined network entity in order to have control. As if digging in for a long struggle, the US fund has forced TIM to review the terms of a separate agreement that would give Open Fiber access to TIM’s infrastructure and help the rival complete fibre optic rollout plans in remote areas, another of Reuters’ sources said.