TIM counter-offer could mean Italy single network is back on

Cassa Depositi e Prestiti (CDP) is working on a counter-offer for TIM’s network alongside existing investment partner Macquarie, according to Italian press reports.

The offer will value the Italian incumbent’s fixed network assets at around €20 billion, Reuters claimed on Wednesday, citing a piece in Italian newspaper Il Messagero. The report has yet to appear on the paper’s website.

TIM recently confirmed that it had received a non-binding bid from KKR, already a shareholder in its fibre business, for an unspecified stake in its NetCo networks business, which it has yet to spin off. It seemed pretty clear at the time that the offer would serve as a stalking horse, potentially prompting the state – or indeed other would-be investors – to move quickly to counter-bid. If Il Messagero’s sources are correct, that is exactly what is happening.

The report states that CDP will finance 60 percent of the offer, with Macquarie contributing the remaining 40 percent, which makes sense, given that it would mirror the pair’s holdings in Open Fiber, Italy’s other major fibre builder.

Should that be the case, it surely reopens the case for a single high-speed network operator in Italy.

In May last year TIM, Open Fiber, CDP, KKR and Macquarie all signed an MoU geared towards merging TIM’s network with that of Open Fiber, initially with a view to making it all happen by the end of October. Essentially, the plan centred on state-owned CDP – a shareholder in both operators – making an offer for the TIM network. But disagreements on the value of the assets, plus a change in government in Italy, derailed the process and an offer never materialised.

The new administration in Italy made it very clear that a publicly-owned fixed infrastructure is its primary goal when it formally canned the process late last year, but efforts to come up with a new plan to that end have come to nothing so far. Further, the ‘single’ element of the plan appeared to have fallen by the wayside, with the government indicating that it was unconcerned by the number of fixed networks in the country.

The lack of action clearly prompted KKR to make its latest overture. More than a year after its bid to take over the whole of TIM failed, the investment firm came back to the table. Its offer to TIM was for an undefined stake and an undisclosed sum, although unnamed sources from various news outlets said it would value the NetCo business as a whole – including TIM’s core fixed-line business, its FiberCop fibre-to-the-home (FTTH) unit, and international wholesale operator Sparkle – at around the €20 billion mark.

Clearly CDP did not think it needed to better that figure, doubtless because it is potentially offering a neater solution that the Italian government is likely to back. KKR would have needed a state partner to find favour with Rome, which previously indicated it was open to working with foreign players, but not to handing over majority ownership.

According to the report cited by Reuters, CDP’s chief executive Dario Scannapieco has met with Italian Economy Minister Giancarlo Giorgetti with a view to agreeing a way of proceeding that would fit with its public ownership agenda.

That being the case, the stars could finally be aligning in Italy, and some certainty for the future of TIM’s networks business could be about to emerge. But then again, we’ve been here before.

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