TIM's future on hold until Italian elections and possibly beyond

Italian operator group TIM will have to wait longer for some clarity on its future, with any major moves likely on hold until after the country’s general election later this month.

This state of flux is not unusual for TIM, whose future direction has been the subject of debate for years now. The market had been expecting a firm offer from Cassa Depositi e Prestiti (CDP) for TIM’s network by now, but nothing materialised over the summer break and the Italian press is this week awash with reports that the state-owned lender will hold back until the end of September.

Financial publication Il Sole 24 Ore is one of a number to claim that CDP will table a non-binding bid after 25 September, the day Italy goes to the polls. Specifically, the paper’s sources say the offer will come during the last week of the month.

That’s not a huge delay for TIM and in many ways is barely newsworthy…but its worth considering that the election itself could well have a bearing on the outcome for the telco.

The formation of Mario Draghi’s coalition government in 2021 brought uncertainty to the Italian single network project – the merger of the fibre network assets of TIM and Open Fiber, as if we could forget – which had been championed by his predecessor. But in May this year TIM and Open Fiber, along with KKR and CDP, the latter being a lynchpin in this whole affair as a government entity and a shareholder of both companies, inked an agreement to work towards the merger, with the aim of signing a binding contract by the end of October.

Thus it seemed all would progress quite nicely.

However, Draghi’s government collapsed in July, setting the cat amongst the pigeons once again. And with national-conservative candidate Giorgia Meloni, leader of the decade-old Fratelli d’Italia (or Brothers of Italy) party, widely tipped to emerge victorious and to set up a new coalition government, there are once again question marks over the whole scheme.

Specifically, while Meloni is in favour of the single network plan, her vision is one of renationalisation. As Reuters reported last month, and the Italian press has repeatedly noted, Meloni is keen to see CDP take control of TIM and subsequently merge its network assets with those of Open Fiber.

And the question of the valuation of TIM’s assets also comes into play.

With TIM’s stock market valuation sitting at around the €5 billion mark, many billions below the value of its network, it’s clear why the potential new PM might want to look at a CDP takeover for more than simply idealogical reasons. European regulators would likely raise an eyebrow or two, but it’s pretty clear that whatever the course taken by whatever the new government turns out to look like, it might well differ from the one we had expected.

Meanwhile, Vivendi, which remains TIM’s largest shareholder, is looking for a valuation of around €31 billion for the telco’s network assets, according to a Reuters report from June, which cited an unnamed source at the French firm. However, analysts’ valuations have come in at around the €17 billion-€21 billion, the newswire previously noted, while TIM itself is looking for €20 billion. There’s a big mismatch here, and one that could stand in the way of the acceptance of any binding offer from CDP – for the network assets, that is – should it come in late September as the local media are predicting.

The smart money is probably on the Italian single network plan being re-drawn, to a greater or lesser extent, before it can be concluded.

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