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Italian government backs TIM’s access network plan

TIM and the Italian government appear to be approaching common ground over the future of Italy’s broadband network.

To say that the Italian incumbent has not always found itself in agreement with the state when it comes to the fixed network would be a massive understatement. But relations certainly seem to be thawing, with the news this week that the government has approved the telco’s plan to sell off a stake in its access network business to investment company KKR.

National paper La Repubblica broke the news on its front page on Wednesday, claiming that the government has given the go-ahead to the KKR deal. There has as yet been no official comment from the state.

KKR has submitted a binding offer for a 37.5% stake in FiberCorp, TIM’s access networks business. The deal would give FiberCorp an enterprise value of €7.7 billion and would see TIM take €1.8 billion in cash proceeds. TIM would retain control of the business with a 58% stake and would serve as the exclusive builder and technical supplier for rollout and maintenance of FiberCop’s network. The remaining 4.5% stake in the company would be held by Fastweb, in exchange for contributing its 20% stake in Flash Fiber – its fibre-to-the-home (FTTH) network joint venture with TIM – to FiberCorp.

TIM recently said its board will make a final decision on KKR’s offer on 31 August. It seems the government’s approval of the transaction has come just in time.

The KKR deal has been widely viewed as a key element in Italy’s plan to push forward with a single high-speed fixed network, since it strengthens TIM’s position in the market and leaves it better placed to call the shots in any new, merged infrastructure.

Just to recap, the state-backed plan for a single network would require some kind of merger between TIM’s fixed assets and the network rolled out by Open Fiber, a 50-50 JV between state-owned utility Enel and investment bank Cassa Depositi e Prestiti (CDP). After its initial resistance, TIM has come around to this idea, but only if it can retain control of the infrastructure.

La Repubblica notes that the KKR deal “opens the way to an agreement with Open Fiber,” describing the government’s support of the plan as a “breakthrough” in the current telecoms market.

Despite the paper’s upbeat tone, it would be wise to avoid getting too excited about the prospects of a single network in the immediate future. The KKR transaction, presuming it is confirmed in the coming days, is an important step in the right direction, but there are still many hurdles to be overcome before the various industry stakeholders reach an accord.

There is much more of this story still to come.

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