During its Capital Market Day yesterday, TIM, the big Italian telecom operator, headquartered in Rome, tabled a plan to separate its network infrastructure assets (referred to as NetCo) from its services delivery operations (ServiceCo). The company suggests such a transformation recognizes that the TIM Group operates in “an intensely competitive market yet is constrained by one of the most stringent regulatory frameworks in Europe.”
By breaking up the classical vertically integrated telco model, TIM hopes its regulated and unregulated businesses on their own will become more competitive and more profitable in their respective operations. Here’s how TIM is planning the breakup.
NetCo will encompass the fixed wireline network, both transport and access (branded, FiberCop) segments, as well as domestic and international wholesale businesses including submarine cable unit, Sparkle. TIM believes that NetCo can be the first European fiber network infrastructure and technologies hub available to the whole market and with a widespread presence across Italy. NetCo will sell transport and access connections on a wholesale basis to any retail telecom service provider. NetCo will be tasked with accelerating deployment of the fiber network, primarily with fiber-to-the-home. TIM sees NetCo benefiting over medium- and long-term investment cycles with returns typical of the infrastructure business.
ServiceCo comprises three operating groups: TIM Enterprise, TIM Consumer and TIM Brasil.
TIM Enterprise will include all commercial activities geared for the Enterprise market, including the digital enabling companies, cloud consultancy Noovle, electronics manufacturer Olivetti and cybersecurity specialist Telsy, along with 16 data centers across Italy. The unit can leverage its leadership position among government agencies and Enterprise customers with its unique end-to-end selling proposition. With a tech company approach, TIM Enterprise aims to increase its share of a growing digital services market that is driven by cloud, IoT and cybersecurity trends.
TIM Consumer covers all the fixed and mobile commercial activities in the Consumer, and Small and Medium Business retail market. It includes the TIM mobile network assets and service platforms. The company expects to improve its TIM Consumer performance by reorganizing and simplifying its operations.
TIM Brasil, a leading player in the South American communications market, will continue working towards its “Next Generation Telco” goal. Following the acquisition of the Oi Group’s mobile business, TIM Brasil’s revenues, EBITDA and cash flows are expected to accelerate with solid growth trends.
Overall, TIM sees the new disaggregated organization as well-positioned to take advantage of digital transition opportunities. Each operating entity will have its own strategy with a focus on execution and reducing leverage while raising its rating profile. At the same time, the company hopes to realize improved finances resulting from the deconsolidation of the fixed network and the prospects of new minority shareholders in TIM Enterprise.
TIM expects the breakup activities, including regulatory and corporate approvals, will take 15-18 months. Where possible, TIM will accelerate the delayering plan’s execution while assessing other strategic options including potential M&A activities.
By John Celentano, Inside Towers Business Editor
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