KKR and Iliad reportedly interested in TIM network

KKR and Iliad are reportedly among those interested in making a bid for TIM’s network assets, it emerged in recent days, with the former purportedly keen to broker a deal by partnering with the Italian government.

Private equity firm KKR is in talks with Italian officials about an offer for TIM’s fixed infrastructure, but only as part of a joint venture with a state-owned company or a newly-established state-backed financial vehicle, Bloomberg reported, citing unnamed sources familiar with the matter. Naturally, there has been no official comment from TIM, the Italian government, or KKR itself.

Nonetheless, the story makes a lot of sense. KKR is already in the mix, holding a 37.5 percent stake in FiberCop, TIM’s next-generation networks arm; the stake was valued at €1.8 billion when KKR bought it two years ago. The PE outfit also made a €10.8 billion bid for the whole of TIM just over a year ago, but after several months of indecision from the telco the proposed deal came to nought. Clearly though, KKR is interested in getting on its hands on TIM’s assets, one way or another.

Meanwhile, the long-held desire of various Italian governments to keep some control over a national asset, coupled with the current Meloni-led administration’s inclination towards re-nationalisation, means that a JV between a state entity and a new investor looks like a credible option. KKR is not a telecoms operator; it just wants the best returns possible from infrastructure investments.

And it could be just the partner the government is looking for. A fortnight ago the government effectively cancelled the ongoing plan to create a single fixed infrastructure in Italy by merging TIM’s network assets with those of Open Fiber, a rival wholesaler that is majority owned by state lender – and TIM shareholder – Cassa Depositi e Prestiti (CDP). CDP had been scheduled to make an offer for TIM’s assets, but delays triggered by differences in opinion on valuation and the general election that brought the Meloni government to power meant a bid never came.

And the government has now given itself until the end of the year to come up with a workable solution, in cooperation with the various stakeholders. For its part, TIM said it is open to discussion on the subject.

While KKR might be the most likely to broker a deal, it is reportedly not the only company interested getting in on the action when it comes to TIM’s network.

Reuters also named KKR as being a key player here, its sources sharing that the firm has been working closely with TIM chief executive Pietro Labriola of late, the CEO being keen to prepare for the outcome of any talks with the government.

But the newswire also names French telecoms operator Iliad and the Italian postal service Poste Italiane as having had contact with TIM as potential investors. It makes the point that any deal involving foreign investors would come under ‘golden power’ rules, which give the state the ability to block such transactions on national security grounds, should it so desire.

It is worth adding that Poste Italiane is a majority state-owned company, and would therefore pass muster, on those grounds at least. But Iliad, being from north of the border, would likely not have an easy ride, as compatriot and major TIM shareholder Vivendi discovered in recent years. It’s not out of the question that Iliad is interested in TIM’s network: it is an ambitious company, which broke into the Italian mobile market in 2018, and added a fixed broadband element into the mix at the start of this year.

Owner Xavier Niel is no stranger to financial investments and could certainly be interested in the TIM network from the point of view of returns. But a more likely scenario would be for Iliad to have a minority stake in the network business, perhaps alongside another investor, which would in turn help it to further its own broadband ambitions in Italy.

At this stage it’s all speculation, of course. And we have been speculating about TIM’s future for some time. The end of the year may bring some closure, given the government’s deadline, but any deal will be tricky to hammer out, so there can be no guarantees. The only thing we can say right now is that KKR is once again starting to look like it might be a key player in this game.

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