TIM’s biggest stakeholder, the French media conglomerate Vivendi, is yet to agree and could scupper the deal
The Italian government has decreed that the Ministry of Economics can take a stake of 15% to 20% in Telecom Italia’s fixed network.
This implements a Memorandum of Understanding (MoU) signed on 10 August by Italy’s Treasury and US fund KKR for joint ownership of the NetCo.
A second, draft decree, issued today, will allow Italy’s Treasury to take full ownership of TIM’s submarine cable unit, Sparkle, as part of the agreement with KKR.
Rise of the NetCo
“The government took action to defend the national interest and the workers,” Prime Minister Giorgia Meloni claimed in a statement.
The would seem to draw a line under months and months of wrangling between various parties for control of the infrastructure: TIM is €26 billion in net debt and burning cash, like many other big European telecoms groups. It is the first Tier 1 to hive off the infrastructure into a NetCo to reduce both debt and staff, although possibly it will not be the last.
The Czech Republic’s O2 led the way back in 2014 and Denmark’s TDC followed suit, under the leadership of Allison Pearson, who is to replace Philip Jansen as CEO of BT Group.
Finer details
KKR offered around €23 billion for the NetCo after taking into account debt and a variable items, while allowing the government to maintain oversight of the assets.
Reuters reports that the Economy Minister Giancarlo Giorgetti told reporters the decrees would allow the Treasury to acquire a minority stake in NetCo worth “up to €2.2 billion,” partnering KKR and other domestic players.
“The government is interested in is reaffirming public control over certain strategic choices regarding an infrastructure that we deem as strategic,” he said. The government will issue sovereign bonds to fund its investment, according to sources.
Reuters has previously reported that an Italian infrastructure fund, F2I, is set to invest in NetCo, making the combined stake in Italian hands to 30% to 35%.
Giorgetti said that the state lender, Cassa Depositi e Prestiti (CDP), could also invest.
Vivendi not onboard – yet?
The decrees give political heft to KKR’s approach, but the infrastructure sale still needs the approval of TIM’s biggest investor Vivendi, which holds a stake of about 24%. Vivendi has been holding out for a higher valuation and could still scupper the deal.
TIM’s separation into a NetCo and Serv(ice)Co looks inevitable, it’s a case of coming up with a deal acceptable to all parties.