Telecom Italia’s (TIM) board has approved an agreement with private equity outfit KKR Infrastructure and Swisscom-owned service provider Fastweb and a letter of intent with CDP Equity to create a single combined fibre network in Italy.
As part of a complex weave of transactions, TIM, KKR Infrastructure and Fastweb will create a new company into which TIM’s existing network will be transferred alongside the fibre network built by FlashFiber, a JV between TIM and Fastweb in which TIM holds an 80% stake.
TIM’s board also approved a letter of intent with CDP Equity to integrate the combined fibre unit, FiberCop, into a single national network company.
TIM said that FiberCop will allow TIM, Fastweb and other operators to co-invest in fibre coverage across the country. TIM has signed a memorandum of understanding with another operator, Tiscali, to create a partnership to develop fibre broadband through Tiscali’s participation in the FiberCop co-investment plan.
The new company created by the agreement with KKR Infrastructure and Fastweb will be 58% controlled by TIM, 37.5% by KKR Infrastructure and 4.5% by Fasbweb. KKR Infrastructure has agreed to pay €1.8 billion for its FiberCop stake.
The agreement with CDP Equity is intended to enable the merger of FiberCop and Open Fiber, an existing government-backed fibre rollout in Italy, to create a single infrastructure company that will be open to all. TIM will own at least 50.1% of the new company and governance will be shared with CDP Equity. The merger is expected to take place during the first quarter of next year at the latest.
Analysts at Jefferies said that TIM stood to benefit from the agreements financially, with the splitting off of the infrastructure business contributing to improved enterprise value-EBITDA ratio for the rump company.
Jefferies also said that TIM would benefit from lower execution risk thanks to its co-investment with Fastweb and Tiscali, and that the creation of a single company would help improve customers take-up.
The analysts also said that the reassignment of debt to fund capex to FiberCop would improve the former’s finances, while the second-stage, the merger with Open Fiber, would further reduce risk by eliminating competitive overbuilding.
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