TIM CEO upbeat on imminent fibre merger despite delays

The boss of Italian telco TIM will soon broker a deal to merge its fibre network assets with those of rival Open Fiber, but admits it has not been smooth sailing.

Pietro Labriola made the comments to journalists in the wake of the incumbent’s Q1 results announcement, Reuters reports. And those financials help to demonstrate exactly how much TIM needs to ring the changes in its domestic market.

“There have been some delays… but stakeholders are interested in carrying out the project. I don’t see problems,” the newswire quoted Labriola as saying. It also suggested that a deal could come within days, an assumption that is doubtless based on the fact that TIM had aimed to reach a preliminary agreement on the matter by the end of April. The telco formally agreed to begin talks with CDP Equity, the private equity arm of state-backed Cassa Depositi e Prestiti (CDP) Group, which holds a 60% stake in Open Fiber – and is one of its own shareholders – at the start of the month.

A deal in the next few days seems quite hard to believe, given that we have been talking about a potential merger between TIM’s FiberCop business and the Open Fiber wholesale fibre network for years. However, things have been moving in the right direction in recent weeks, and there was no indication from Labriola that the delays he mentioned were significant, so maybe it is time to start believing the tie-up will come fruition.

That has to be good news for TIM. Not because its fibre business particularly needs a boost; if anything, that was the one bright spot in its Q1 numbers, domestically at least. But sorting out the single network company would be one less thing for the telco to have to focus on, leaving it freer to turn its attention to the rest of its Italian business.

A 7.7% decline in domestic revenues in Q1 put group turnover below where it was at this time last year, while earnings also fell significantly, impacted by an 18.3% drop in domestic EBITDA. TIM’s issues are much the same as they have been in recent quarters: declining fixed-line accesses and ARPUs and the loss of mobile customers – the decline in human SIMs is offset by M2M, but revenues are lower – in a fiercely competitive market.

TIM is naturally focusing on the positives one of which is its fibre, although here the telco is more interested in telling us about its network reach than sharing actual FTTH customer numbers. And growing that network is also proving expensive. Capex in Italy was up to €706 million in Q1, an increase of €216 million on the year-earlier quarter, mainly due to the development of the FTTC/FTTH networks, TIM said.

The telco was also keen to share that revenues from what it terms innovative services are growing, which seems to translate as an increase in ICT revenues, driven by growth in cloud services. On a related note, this week TIM announced the appointment of former Apple executive Elio Schiavo to the role of Chief Enterprise and Innovative Solutions Officer, reporting to Labriola.

That gives us an indication of the direction TIM intends to follow, but there is still a lot to sort out at the core telecoms services business in Italy. And the operator needs to get that fibre network merger over the line sooner rather than later.