Under the plan, TIM would merge its fixed network with that of rival Open Fiber, controlled by CDP, as part of efforts by CEO Pietro Labriola to revive TIM’s fortunes via a complete separation of its fixed network from service operations.
The long-awaited preliminary agreement has also been signed by infrastructure funds Macquarie and KKR, which hold minority stakes in Open Fiber and TIM’s last mile network unit, respectively.
Both KKR and Macquarie would be minority investors in the single network entity.
KKR decided to join the TIM-CDP project after Italy’s former telephony monopoly rejected a 10.8 billion euro ($12 billion) proposal from the US fund to take control of TIM and exit it coast before dividing its fixed telephony and services assets.
Shares of TIM rose 4% in early trading, outperforming the Italian blue chip index.
CDP, which is TIM’s second-largest investor with a 10% stake and which owns 60% of Open Fiber, will control the combined network, the statement said, adding that the parties aim to negotiate a binding agreement by the end. october.
The agreement will be subject to the approval of national and European antitrust authorities. TIM shareholders will also have to vote on the deal. Analysts estimate that the finalization of a transaction could take up to two years.
Italy wants to create a single champion of the broadband network to avoid duplication of investments and accelerate the deployment of fiber optics and the digitization of its economy.
Under pressure for years in its hypercompetitive national market, TIM, riddled with debt, is seeking to raise funds by separating from its fixed line network, an asset that analysts value between 15 and 20 billion euros.
As of Friday’s close, shares of TIM had fallen 38% year-to-date and were near their lowest level ever in March, after the company reported an annual loss and KKR’s bid have it.
By divesting itself of its network infrastructure, TIM will have cash to develop data and connectivity services for consumers and businesses, CEO Labriola said in a message to staff seen by Reuters on Monday.
Options being discussed for the final structure of the deal with Open Fiber include an outright sale of TIM’s network assets, including international cable unit Sparkle, sources told Reuters.
The new network entity will take over a significant portion of TIM’s national debt and staff.
Broker Equita said a 100% exit from the network would maximize TIM’s revenue, while increasing the chances of obtaining antitrust approval.
TIM and CDP had signed a preliminary agreement in 2020, but this plan, which called for TIM to retain a majority stake in the combined entity, fell through due to political, regulatory and valuation issues.
($1 = 0.9298 euros) (Reporting by Elvira Pollina; Editing by Valentina Za and Susan Fenton)