TIM’s hopes of bringing in a sizeable amount of cash for its networks business appear to have been seriously dented, with reports emerging that one of the bidders has pulled out.

The pairing of Cassa Depositi e Prestiti (CDP) and Macquarie Asset Management has decided to drop its offer for TIM’s network assets, currently dubbed NetCo, Bloomberg reported on Monday, citing unnamed sources.

It seems that the CDP/Macquarie tie-up has not only declined to increase its offer – as requested by TIM almost a fortnight ago – but is also backing off from the non-binding bid it previously tabled. Should the report prove correct, that leaves private equity firm KKR as the sole bidder for the assets.

It would be a mistake to assume that the end of the bidding war also means the end of the saga though. KKR might be the only player left in the race, but that does not mean it will offer enough to satisfy TIM’s major shareholder Vivendi, which has been the driving force behind the telco’s quest for more money. Well, that and its massive debt pile, of course.

When TIM’s board of directors analysed the latest bids from CDP/Macquarie and KKR and once again deemed them insufficient, it highlighted that there was a “readiness expressed by at least one of the bidders to improve its non-binding offer.” It now appears that was KKR. But where is the incentive for KKR to throw yet more millions of euros at the Italian incumbent if it is the only bidder?

You could argue that if KKR is serious about picking up the NetCo business – that’s TIM’s fixed-line assets, its FiberCop fibre-to-the-home (FTTH) unit, and international wholesale operator Sparkle – it will have to at least meet Vivendi in the middle on valuation. TIM has after all made it clear that selling off NetCo is not is only option and could elect to walk away from the process altogether if the financials don’t stack up.

However, selling NetCo is its best option. Indeed, as chief executive Pietro Labriola said alongside the telco’s first quarter results presentation last week, the “NetCo disposal remains the main option to structurally deleverage TIM.”

There has, unsurprisingly, been no formal comment from TIM on the latest rumours. The telco had given the two sets of bidders until 9 June to submit new, increased offers, so we might well not know until then how things are likely to play out.

As we have noted many times, CDP/Macquarie and KKR had both lodged similar bids, the former at €19.3 billion and the latter €19 billion plus €2 billion in earn-outs in the event of a TIM/Open Fiber network merger. Those figures are based on reports from the newswires and the Italian financial press, of course; the parties themselves have not shared any information on that score. Vivendi, which owns 23.75% of TIM, has reportedly valued the assets at €31 billion, but there have been reports that it would be willing to go as low as €26 billion. That still leaves a fairly big valuation gap that will test KKR’s desire to acquire NetCo.

However, CDP/Macquarie’s decision to pull out of the race appears to be about more than just money.

Bloomberg’s sources intimate that concerns over antitrust issues may have played a part in CDP/Macquarie’s decision to pull out. That’s something that has come up on and off during this lengthy process, CDP and Macquarie being joint owners of TIM’s major network rival Open Fiber, while CDP already holds just under 10% of TIM as well.

To further complicate matters, the sources said CDP could still play a part in any networks deal at a later date; the state lender could buy in alongside other Italian investors to satisfy the government’s desire to keep TIM’s network assets in state hands, the newswire suggested.

Finally, the sources also noted that no final decision has been taken and CDP/Macquarie’s plans could still change. And so the state of uncertainty at TIM continues.

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