MILAN (Reuters) – Telecom Italia (TIM) will finalize the historic sale of its fixed network to the US fund KKR on July 1, an operation that will make TIM the first telephone operator in a large European country to separate from its fixed network.
WHAT DOES TIM SELL?
Tim’s fixed fiber and copper network reaches almost 89% of homes and extends for over 23 million kilometers across the country, making it the main component of the Italian telecommunications infrastructure.
WHAT WILL TIM BE AFTER THE SALE OF THE NETWORK?
TIM will move more than half of its Italian employees to the network company, leaving it with approximately 16,000 employees in Italy. He will reduce his financial leverage by 14 billion euros, bringing it to 1.6-1.7 times Ebitda after lease.
In the industrial plan prepared by CEO Pietro Labriola, with the sale of the network Tim will have greater commercial flexibility to compete in the national retail services market and will be able to have greater opportunities to explore M&A operations and partnerships.
In Italy it will operate through Tim Consumer on the Internet and telephony services market for private customers and small businesses while Tim Enterprise will provide connectivity, cloud and IT security services for large companies. In Brazil, TIM will continue to operate with its subsidiary TIM SA.
WHY IS TIM SELLING THE NETWORK?
Pressured by a net debt of 27 billion euros, Tim has decided to sell its main asset after years of unsuccessful efforts to restructure its domestic operations, whose profits and revenues have been declining for years.
In addition to facing strong price competition in the domestic market, Tim was further pressured by rising interest rates.
WHAT IS THE VALUE OF THE OPERATION?
Kkr, which was already a minority investor in FiberCop – the part of the network that goes from street cabinets to homes – valued Tim’s entire access network at up to 22 billion euros, of which approximately 3 billion euros in earnouts mostly linked to a future potential combination of these assets with those of Open Fiber, owned by Cassa Depositi e Prestiti.
WHAT IS THE ROLE OF THE ITALIAN GOVERNMENT?
The executive led by Giorgia Meloni approved the operation as part of a broader agreement with KKR, which provides for the entry of the Treasury into the network company, considered to be of strategic importance, with a stake of up to 20%.
WHO ARE KKR’S OTHER PARTNERS IN THE NETWORK AGREEMENT?
The Italian infrastructure fund F2i will have a 10% stake, while Abu Dhabi’s sovereign wealth fund Adia and Canada Pension Plan will have stakes of 20% and 17.5% respectively.
WHAT ABOUT TIM INVESTORS?
So far, investors have shown little enthusiasm for the new Tim. The stock fell 24% when Labriola unveiled prospects for the new business in March, and the stock remained subdued.
Vivendi, Tim’s main shareholder, is challenging Tim’s decision to sell the network in court and questions the sustainability of the remaining assets.
(Translated by Chiara Scarciglia, editing Antonella Cinelli)
