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Italy’s single network plan will have to be redrawn

Italy’s plan to create a single high-speed fixed network by merging TIM’s assets with those of Open Fiber is now unlikely to come together in its current form.

There has been talk of delays for some time. Industry watchers had been expecting state-owned lender Cassa Depositi e Prestiti (CDP) to table a firm offer for TIM’s fixed network assets over the summer, as per the memorandum of understanding (MoU) inked by the telco, Open Fiber and their various investors in May, but the Italian elections proved to be something of a stumbling block. The word on the street was then that an offer would come once the country had been to the polls on 25 September.

However, a statement from TIM earlier this week indicated further disruption. And while the incumbent telco gave no indication that the new delays would be terminal – far from it, in fact – reports in the Italian press suggest that this is about more than just a matter of a bit of extra negotiation time.

“CDP Equity, Macquarie and Open Fiber have communicated that the evaluation process currently underway, given the magnitude of the transaction and the time required to analyse all the information received from TIM, requires an extension of the indicative timeline originally discussed, and they have expressed their readiness to reassess it,” TIM announced on Monday.

The MoU originally made provision for the companies involved to sign a binding contract by the end of October.

At first glance, that message seems fairly simple: it’s a ‘this is going to take a bit longer than we thought because there’s a lot to consider’ statement. Particularly given that TIM added that “the parties will meet this week,” as its closing line.

But reactions in Italy suggest that this already complex process just got significantly more so. It might now be back to the drawing board.

A flurry of letters exchanged between TIM and CDP, as well as the lawyers and so forth, has effectively put and end to May’s MoU, La Reppublica reported this week. The paper believes TIM was pushing CDP for new deadline dates, given that those previously agreed have either expired or will soon do so, but the bank said it was unable to comply and asked for an extension.

However, it notes Dario Scannapieco, CDP’s chief executive, will now wait for Italy’s new government to be in place before revisiting the single network plan, which could look very different under the new administration.

New PM Giorgia Meloni is in favour of a single network, but with a focus on public ownership. That’s not hugely different than the existing plan for CDP to buy TIM’s fixed assets, but the terms and conditions could vary wildly. Meanwhile, the ongoing debate over the value of those assets is likely to be extended as a result of the new government’s accession.

Essentially, as many suspected a month or so ago, the single network plan is going to be reworked. And in the meantime, TIM’s share price is feeling the heat.

 

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