Rome wants end to gladiatorial display between TIM and Open Fiber

Italy’s Government continues to try and knock heads together in the country’s fibre broadband market in order to avoid duplication of investment and create a ‘national champion’.

According to a report by Reuters, Rome is angling once again to broker a merger deal of some sort between incumbent Telecom Italia (TIM) and Open Fiber, a fibre-to-the premise (FTTP) infrastructure provider.

From the Government’s point of view this makes perfect sense.

By having one national FTTP wholesale provider, which is majority-owned by TIM (at least initially) and grants ‘equal access’ to retail providers – this is essentially the Government’s aim according to unnamed sources cited by Reuters – there’s more likelihood of greater penetration of ultra-fast broadband within a shorter timeframe.

Consolidation also promises better returns on investment for Casse Depositi e Prestiti (CDP). The state lender owns a 10% stake in TIM and a 50% chunk in Open Fiber (the other half of Open Fiber is held by utility company Enel).

Previous attempts at pooling fibre assets of TIM and Open Fiber have come unstuck, and there’s no reason to believe – as the Reuters report indicates – that it’s going to be plain sailing this time around.

For one thing, there are apparently concerns among the prospective merger partners about who will call the shots. TIM, which runs both retail and wholesale operations, has repeatedly said it wants to keep control of any merged entity with Open Fiber. Getting agreement on governance between TIM and Open Fiber is perhaps made more difficult by the arrival of US investment firm KKR.

In February, KKR signed a deal to become TIM’s exclusive partner to develop its ultra-broadband network and is now reportedly in talks about selling 40% of its last-mile copper and fibre network to the private equity firm. This development appears to have focused minds in Rome, which would prefer a TIM-Open Fiber tie-up.

Italy’s Government, according to a Reuters source, also wants the future single network to be structured in such a way to guarantee “its independence from the incumbent”. TIM might have some objections there.

In an attempt to try and patch over differences between and Enel, and pledge to a single broadband network, Economy Minister Roberto Gualtieri reportedly asked TIM and Enel to sign a Memorandum of Understanding by the end of this month.

Maybe things will become a bit clearer by then, one way or the other.