MILAN: The phone group and Italian state investor CDP said late Sunday that they had signed a preliminary agreement to combine the fixed network assets of the phone group with those of state-owned broadband rival Open Fiber.
The long-awaited move is meant to pave the way for the creation of a single, ultra-fast broadband network across all of Italy. CEO Pietro Labriola is working on a plan to turn TIM around, and a key part of that plan is the complete separation of its landline grid from its service operations.
Infrastructure funds Macquarie and KKR also signed the preliminary agreement. Macquarie and KKR each have a minority stake in Open Fiber and in TIM’s last-mile network unit.
After the former Italian phone monopoly TIM turned down a $12 billion offer from the U.S. fund to take control of TIM, delist it, and split its fixed and service assets, KKR decided to join the TIM-CDP project.
Shares of TIM went up 4% in early trading, while Italy’s blue-chip index went up 0.6%.
TIM and CDPsaid that CDP, which owns 60% of Open Fiber and is TIM’s second-largest investor with a 10% stake, will run the combined network. They also said that they hope to reach a binding agreement by the end of October.
Any deal that is legally binding will have to be approved by antitrust authorities in both the US and the EU. The deal will also need to be approved by TIM’s shareholders.
Italy wants to make a single broadband network champion so that investments won’t be made twice and so that it can speed up the rollout of fiber optics and the digitalization of its economy.
TIM has been under pressure for years because its home market is very competitive. It wants to raise money by selling its landline network, which analysts say is worth between 15 billion and 20 billion euros.
Sources say that the sale of TIM’s fixed network is also one of the options being talked about for the final structure of the deal with Open Fiber. A big part of TIM’s debt and domestic staff will be taken on by the new network entity.
TIM and CDP signed a preliminary agreement in 2020, but that plan, which called for TIM to keep a majority stake in the new company, failed because of political, regulatory, and valuation issues.
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