The Italian government has approved a decree that will allow it to take up to a 20% stake in Telecom Italia’s (TIM) fixed-line network assets.
With headquarters in Rome, Milan and Naples, TIM is the largest Italian telecommunication service provider, offering both fixed and wireless services. The government has been constantly looking to ensure investments are carried out to upgrade TIM’s fixed network to fast fiber optics from copper.
But for its part, TIM is currently seeking to sell off its core assets to reduce debt and the workforce. Its net debt came to $28 billion (€26.2 billion), up $0.86 billion (€0.8 billion) compared to the end of 2022.
Now, Italy has taken a significant step toward reducing TIM’s debt, paving the way for acquiring a stake in NetCo, a venture compromising both TIM’s domestic fixed-access network and Sparkle, its international submarine cable unit.
The decree was approved yesterday, following a memorandum of understanding (MoU) signed by the Italian Treasury and private U.S. investment firm KKR earlier this month.
“The government took action to defend the national interest and the workers,” Italy’s prime minister Giorgia Meloni said in a statement. She noted that the move is “a first step, which will be followed by more market-driven decisions.”
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The MOU says that the Italian government is set to acquire a stake between 15-20% in NetCo, with a maximum investment of $2.3 billion (€2.2 billion). Giancarlo Giorgetti, Italy’s minister of economy and finance, noted that the stake will enable Italy to play a role in "what we consider to be a decisive infrastructure for the country's future."
The government already holds a 9.8% stake in TIM through Cassa dei Depositi. KKR’s bid for TIM’s assets, which is estimated to be worth around $24.85 billion (€23 billion), is expected to be finalized by Sept. 30.
Furthermore, during a press conference on Monday, Giorgetti emphasized that the government’s participation in NetCo is aimed at “ensuring the exercise of special powers,” influencing network strategy and security. "What the government is interested in is reaffirming the public control over certain strategic choices regarding an infrastructure that we deem as strategic," he noted.
Reuters reported that F2i, an Italian infrastructure fund, is also set to invest in NetCo, further increasing the combined Italian stake to approximately 30-35%. In addition, Giorgetti highlighted the potential for a state lender Cassa Depositi e Prestiti (CDP) to join the venture.
While NetCo includes the assets of FiberCop, Giorgetti pointed out that KKR's existing investment ($1.9 billion) in FiberCop, at 37.5% stake, further solidifies its role as a natural partner for this venture.
Notably, KKR had previously made a non-binding offer of $11.67 billion (€10.8 billion) to acquire TIM. However, the bid encountered challenges due to a disagreement concerning the thoroughness of due diligence.
Amidst reports indicating hesitancy by TIM’s largest investor, Vivendi, the agreement between the government and the U.S. investment company is expected to pave the way for a successful conclusion to this strategic move. Nevertheless, challenges may arise due to Vivendi’s stance on the matter.