AGI – A new era begins for Tim. A historic step is about to take place for the main telephone company in the country. After many years, attempts, projects, the famous and delicate dossier of the network spin-off is coming to fruition.
The date circled in red is July 1st, the day set for closing for the birth of Netco, the network company that Tim sells to the US fund KKR. A chapter closes and a new era opens.
What is the network?
Tim owns and operates a primary access network, in copper and fiber optics, which serves the cabinets (those lockers that you see on the sidewalks of our cities) as well as the ultra-broadband connections (i.e. with internet access at speeds greater than 30 Mbps) of end customers. Then it owns the so-called secondary access network, also in both copper and fiber optics, which from the cabinets reaches the individual homes of Italians. Tim’s fixed network in fiber and copper reaches approximately 89% of homes and extends for over 23 million kilometers throughout the country, making it the main component of the Italian telecommunications infrastructure.
Because Tim sells the network
Tim is ready to cede control of Netco – in addition to dedicating itself to ‘core’ telephone and internet services and more ‘advanced’ ones such as Cloud, Data Center, content distribution (Timvision platform) – above all to reduce the ‘famous’ debt that has weighed like a millstone on every development plan since the privatization in the 90s. A “burden” that with the current increase in interest rates appears increasingly difficult to manage. With the sale, Tim will reduce its financial leverage by 14 billion euros, bringing it to 1.6-1.7 times the EBITDA. 16 thousand employees in Italy will flow into the network company.
The value of the operation
Kkr has valued Tim’s entire access network at up to 22 billion euros, of which approximately 3 billion in earn-outs, mostly tied to a potential future combination of these assets with those of Open Fiber, in which Cassa Depositi e Prestiti is a shareholder, in turn the second largest shareholder of the group with almost just under 10% of the capital. In addition to the US fund, the Italian infrastructure fund F2i will be involved in the project, which will have a 10% stake, while the sovereign fund of Abu Dhabi Adia and the Canada Pension Plan will have stakes of 20% and 17.5% respectively.
The government’s direction
Tim is historically a company that closely touches the spheres of politics and the attention of various governments, and the executive led by Giorgia Meloni is obviously no exception. After all, we are talking about a strategic asset, for business and social development, of the nation. The circulation of sensitive data and telecommunications infrastructures fall under the regime of special powers, or the ‘Golden power’, the regulatory instrument that allows the government of a State to block or impose specific conditions on certain financial operations that affect the interests national. Specifically, the objective of the current executive “is the creation not of a single network, but of a national network under public control that covers all areas of our territory as soon as possible, especially the most disadvantaged ones”, he has repeatedly explained the Minister for Business and Made in Italy, Adolfo Urso. Therefore, in addition to ensuring public control to prevent the network from falling into private hands potentially interested in controlling personal data for ‘particular’ interests, the government wants to ensure that the best performing connections also reach the areas of the country where these investments they are not profitable, as for example in small municipalities, in mountain areas, in smaller islands, areas of Italy where a significant percentage of the population lives and which through advanced infrastructures may be able to repopulate and develop economically.
Who is Kkr
It is an American fund founded in 1976 in New York by Jerome Kohlberg Jr. and his cousins Hwenry and George R. Roberts. It manages more than 400 billion dollars through a ‘team’ made up of almost 1,700 employees and consultants and over 550 analysts capable of piloting and advising investments from a network located in 20 cities in 16 different countries on 4 continents. In recent years KKR has made investments in over 160 companies ranging from infrastructure sectors (one of the most popular by the fund) to energy, from real estate to credit. Already in November 2021 Kkr had expressed interest in Tim with an offer to take over the entire group. An interest that was returned to the sender.
The role of Vivendi
Vivendi opposed the project. The French media giant is Tim’s largest shareholder with around 24% of the capital and claimed that the ‘correct’ figure for Netco would be 31 billion euros. The company attributable to the Bollore’ family has launched legal initiatives to counter the completion of the transfer of the network.
