The government of Italy is taking a stand against the proposed buyout of Telecom Italia (TIM), Italy’s flagship telecommunications operator, by New York-based private equity firm KKR. Industry Minister Giancarlo Giorgetti remarked that the Italian government cannot relinquish control of its backbone telecommunications network and must keep control of TIM’s key strategic assets in any takeover, Reuters reported.
That sentiment was directed at KKR, which has offered $12.3 billion for full ownership of TIM and to take it private. TIM is Italy’s largest telecom group. As a former monopoly, TIM owns Italy’s largest telecom infrastructure. As of September 30, 2021, TIM’s operations consisted of 30.5 million mobile lines and 16.5 million fixed access lines.
Acceptance of the KKR bid is contingent upon receiving approval from TIM’s board of directors and the Italian government, which owns a 10 percent stake in TIM through state-owned lender Cassa Depositi e Prestiti (CDP).
There also is opposition to KKR’s bid from TIM’s biggest shareholder, French media group Vivendi, which argues the amount that KKR has offered does not reflect TIM’s value. For its part, KKR claims that its original investment in TIM has declined by half.
CDP has called on TIM to consider merging its network assets with those of state-backed rival, Open Fiber. Italy’s Treasury is examining how a potential merger of TIM’s fixed network assets with Open Fiber could result in a wholesale-only unified network operator under the control of CDP, according to Reuters. Industry Minister Giorgetti reiterates that any takeover bid must have an operating framework that the state will still control.
KKR currently has an ownership stake in TIM’s last-mile landline unit FiberCop (as in, fiber-copper). TIM owns 58 percent of Fibercop, KKR has a 37.5 percent share and Fastweb, the main operator in Italy’s broadband fixed network, holds the 4.5 percent balance.
KKR’s proposal would split off all TIM’s network assets, with their management delegated to CDP.
Within the Italian government, there are opposing views on how to solve debt laden TIM’s problems. Innovation Minister Vittorio Colao, a former Vodafone CEO, believes a competitive environment will expedite an ultra-fast fiber rollout. By contrast, TIM’s next-in-line CEO, general manager Pietro Labriola, is drafting a business plan that maintains TIM’s operations on a standalone basis. He believes that TIM-only presentation provides a way for the board to better assess KKR’s offer.
Reuters reports that Labriola’s plan considers numerous options, including splitting TIM’s network infrastructure from its services business through a proportional de-merger, with company’s debt and equity apportioned to the network and services assets.
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