The deal would represent the first of its kind among major European operators, although key shareholders could yet halt proceedings and further drag out this already long-running saga
KKR wins one, could lose one
On 5 November 2023, TIM’s Board of Directors agreed to the sale of its fixed network assets to Optics BidCo, an investment vehicle controlled by US private equity firm KKR, in a deal worth up to €22bn (£19.2bn). KKR’s acquisition of the “NetCo”, which was approved by majority vote (with 11 in favour and three against), would make TIM the first telecoms group in a major European country to spin-out its fixed-line infrastructure in this way. The transaction implements the operator’s delayering plan launched in 2022 and allows it to reduce its €26bn (£22.7bn) debt by around €14bn (£12.2bn). KKR also made a non-binding offer for Sparkle, TIM’s submarine cable unit; however, the Board rejected the bid by the same margin of votes, considering it unsatisfactory.
The transaction is set to end two separate, drawn-out sagas
TIM’s decision to part ways with its fixed assets would bring an end to its involvement in the potential creation of a single broadband network in Italy and to long-running efforts to restructure the former incumbent’s business amid intense competition, burdensome debt levels and political pressure to invest in fibre. On 6 November, TIM signed a transaction agreement with Optics BidCo (which also includes Azure Vista, a wholly-owned subsidiary of the Abu Dhabi Investment Authority). This governs:
The contribution by TIM of a business unit – consisting of primary network and, wholesale activities, and the entire equity investment in its subsidiary Telenergia – into FiberCop; and
The simultaneous acquisition by Optics BidCo of TIM's stake in FiberCop following the aforementioned contribution (i.e. the NetCo).
In doing so, TIM acknowledges the need for antitrust approvals and ‘Golden Power’ authorisation given Italy’s rules that limit foreign investment in domestic firms. The Government considers telecoms infrastructure as a strategic national asset, with the Treasury planning to secure a stake of up to 20% in the NetCo business being sold.
Shareholder Vivendi casts a shadow over the deal
TIM considers the deal a milestone in its reform, which it expects to close by summer 2024. However, there is stiff resistance. For example, trade unions are keen to protect the jobs of over 40,000 employees. Most tricky perhaps, Vivendi (TIM’s largest individual shareholder with a stake of almost 24%) argues that the KKR bid undervalues the network and would risk the sustainability of the remaining services business. Vivendi – which supports a split in principle – has accused TIM’s Board of having "trampled on" shareholder rights by signing the agreement. Merlyn Advisors, which holds a small stake in TIM and recently proposed an alternative strategy to sell the operator’s retail units, also wants a shareholder vote on the sale. While the Government is backing the deal, Vivendi has stated it will use all legal means to challenge it.
