TIM, KKR and Fastweb finally agree to create Fibercop access co

News

A letter of intents has been approved, with the state-backed CPD Equity, to set up a single company through integration with Open Fiber.

It looks like some progress has made in changing the ownership of Italy's copper and fibre local loop, which currently belongs in the main to incumbent TIM. The plan has long been to create a single, national, all-fibre access network company but has hit one obstacle after another, mostly to do with parties not able to agree about terms and conditions.

After a meeting on Monday chaired by Salvatore Rossi, TIM’s Board of Directors approved the agreement with KKR Infrastructure and Fastweb to establish FiberCop.

Secondary network

What TIM calls its secondary network (from cabinets to customers’ homes) will be transferred to the new company along with the fibre network developed by FlashFiber.

FlashFiber is the joint venture in which TIM has an 80% and Fastweb a 20% stake.

The Board also expressed its satisfaction with the recent signing of a letter of intents with Tiscali.

TIM’s Board of Directors also examined and approved the signing of the letter of intents with CDP Equity intended to integrate FiberCop in the wider plan to establish a single national network company.

The Board of Directors granted the CEO, Luigi Gubitosi, the power to sign the agreement.

FiberCop finally?

The agreement with KKR Infrastructure and Fastweb is the first step towards creating an Italian digital fibre network company, which TIM describes as “a turning point for telecommunications in the country”.

FiberCop will allow TIM, Fastweb and other operators to co-invest, completing the fibre coverage plans in black and grey areas of the country and speeding up the adoption of ultra-broadband services.

The project kicked off last week with a Memorandum of Understanding with Tiscali to establish the terms of a strategic partnership intended to develop the ultra-broadband market through Tiscali's economic participation in the FiberCop co-investment plan.

The new company is set up on the basis of the co-investment model open to all other operators, in accordance with the provisions of the European Electronic Communications Code.

TIM will hold 58% of the new entity, KKR Infrastructure 37.5% and Fastweb 4.5%. The company will offer passive access services of the secondary copper and fibre networks to all operators.

Practical details

FiberCop will rely on the fibre infrastructure already installed by FlashFiber to avoid duplication of investments and will promote competition.

TIM will be the exclusive supplier for the construction and maintenance of the networks and will provide additional services to FiberCop, which will have a streamlined structure with fewer than 100 employees.  

The operation promises to speed up switching customers from copper to fibre, and will help reduce the digital divide in Italy. 

TIM has accepted the binding offer of €1.8 billion from KKR Infrastructure, which will buy 37.5% of FiberCop, on the basis of an enterprise value of FlashFiber at €7.7 billion (equity value €4.7 billion).

While Fastweb will have 4.5% of FiberCop following the contribution of the 20% currently held in FlashFiber.

Funding

It is expected that FiberCop will have EBITDA of around €0.9 billion, positive EBITDA – CapEx starting in 2025 and will not require capital injections from shareholders. 
 
The injection of financial resources that derives from the entrance of KKR Infrastructure into FiberCop will strengthen TIM Group’s capital structure, TIM said.

The operation is expected to reach closing during the first quarter of 2021, assuming authorisation is obtained from the competent authorities.


Due diligence process is expected by the end of the year, with the aim of reaching any merger agreement by the end of the first quarter of 2021 at the latest.