- Italian telco has completed the sale its fixed-line grid to KKR-led consortium
- Much-watched transaction will allow TIM to reduce its net debt by $13.8 billion
- New TIM service company hopes to be able to better compete in cutthroat Italian market
The prosecco corks were no doubt popping at Telecom Italia’s (TIM) headquarters in Rome this week after the operator’s relieved CEO was able to announce the completion of a long-gestated plan to sell off its fixed-line grid to the Optics BidCo consortium controlled by investment firm KKR.
“The completion of the transaction with KKR and the Italian Ministry of Finance is the result of two and a half years of intense work, during which we have improved the management of TIM and identified industrial and financial solutions that will enable us to meet future challenges,” said TIM CEO Pietro Labriola in a statement.
The sale of NetCo for up to €22 billion (U.S. $23.6 billion) also allows TIM to reduce its net financial debt by about $13.8 billion, from an adjusted net financial debt of €26.6 billion at March 31, 2024. After leases, net debt stood at €21.4 billion.
NetCo comprises the primary and backbone fixed-line network business of TIM as well as FiberCop, a joint venture between TIM and KKR comprising TIM’s secondary fixed-line network. Following the transaction, TIM’s total headcount will decrease from 37,065 to 17,281.
The transaction has been closely watched at international level as it marks the first time a former telecom monopoly in a major European economy is selling off its fixed network. The conclusion of the deal aligns with TIM’s mission to reduce debt and put its fixed and mobile services business on a firmer footing in the highly competitive Italian market.
“As the first European mover, we chose to separate the fixed network infrastructure services from the other services we provide, to ensure the best, sustainable and fastest possible development of TIM,” Labriola said.
Slow but steady
The process to sell NetCo kicked off in July 2022, when Labriola confirmed the management board’s intention to separate TIM’s fixed-line network infrastructure from the parts of the company that sell services and deal with customers. KKR made a binding offer for NetCo in October 2023 and the European Commission approved the proposed transaction in June 2024.
In addition to KKR, Italian infrastructure fund F2i will hold a 10% stake in the venture, while the Azure Vista subsidiary of the Abu Dhabi Investment Authority (ADIA) and Canadian pension fund CPP Investments will hold 20% and 17.5%, respectively.
In the future, TIM will operate as a service company (ServCo), retaining its retail consumer and enterprise businesses and its mobile network as well as TIM Brasil. TIM also still owns wholesale unit Sparkle, although this business is also potentially up for sale.
In addition, the future business relationships between NetCo and TIM will be regulated through a 15-year term master service agreement (MSA), renewable for a further 15 years. The services comprised in the MSA will be provided at market prices and without any minimum purchase commitments, TIM said.
TIM meanwhile has already been preparing for a post-NetCo future, unveiling a new two-year industrial plan called “Free to Run” in March and highlighting that the sale of the fixed network will allow it to operate with fewer financial and regulatory constraints.
More details on the completion of the transaction will be provided during the preliminary Q2 2024 results conference call that will now be held on August 1, 2024.