It’s finally official: as expected, yesterday 1 July Italy’s tlc group TIM’s NetCo passed under the control of the consortium of investors led by KKR (see the press release here).
As already anticipated in recent months, NetCo, the company holding the management and infrastructural perimeter of TIM’s fixed telecommunications network, has been contributed to FiberCop, the joint venture between TIM and KKR that includes TIM’s secondary fixed network, which in turn has now been acquired by Optics BidCo, a company controlled by KKR and participated in by its co-investors, namely Abu Dhabi Investment Authority (ADIA) and Canada Pension Plan Investment Board (CPP Investments) (see here a previous article by BeBeez).
The last move preparatory to the deal’s closing had been announced in early June, when Fastweb (Swisscom Group) announced the signing of a binding agreement to sell its 4.5% stake in FiberCop to Optics Bidco spa for EUR 438.7 million in cash (see here a previous article by BeBeez). Following that transaction, KKR had risen to 42% of FiberCop, with TIM still owning 58%.
Another protagonist of the NetCo operation, then, as we know, is F2i sgr with Fondo VI Rete Digitale, which, together with Fondo IV Ania and Fondo V per le Infrastrutture Sostenibili, will invest an overall total of one billion euro, for a 10% share of NetCo (see here a previous article by BeBeez). Another 15-20% is finally acquired by the Italian government, which participates in the purchase through the MEF-Ministry of Economy and Finance led by Giancarlo Giorgetti, who in recent days has given his placet to the operation for the purposes of the Golden Power regulation (see here a previous article by BeBeez).
Yesterday Mr. Giorgetti commented: ‘Today’s closing is the first piece of the puzzle in solving this country’s historical problems and a key step in reorganising the Italian telecommunications system. The government is intervening in a strategic sector, with a major industrial policy operation that, among other things, secures Tim and its workers’ (see the press release by the Italian Government here).
Marcello Sala, Director General at the Department of the Economy at the Ministry of Economy and Finance, added “Today an important step is taking place for the future of telecommunications. The Italian government wanted to protect a strategic asset for Italy and intends to maintain this role of guarantor also in the next steps. Furthemore we would like to underline the importance of operating with institutional investors, confirming the attractiveness of investments in our country” (see here the joint statement by KKR and its coinvestors).
Alberto Signori, Partner, Infrastructure at KKR, addded: “Today’s launch of FiberCop marks a historical milestone for the Italian telecommunications sector. It creates a wholesale network accessible to all operators, provides fresh capital for investments into the network infrastructure, and accelerates the conversion from copper to high performing fibre-optic across Italy. The strategic partnership between the Italian government and KKR reflects our shared commitment to fast-tracking the digital transition in Italy and represents the significant role private capital can play to support economic and social development. Together we are poised to deliver a robust digital infrastructure that aligns with Italy’s digital ambitions. We are also pleased to continue our investment relationship with ADIA which has been invested in FiberCop since 2021, while also welcoming CPP Investments and F2i Sgr as new shareholders.”
Khadem AlRemeithi, Executive Director, Infrastructure at ADIA, continued: “The successful closing of the transaction and the launch of FiberCop today represent a landmark event that marks a new chapter in the Italian telecommunications industry. This strategic move is a testament to our commitment since 2021 advancing the sector and contributing to the growth and development of Italy’s digital infrastructure.”
Renato Ravanelli, ceo of F2i sgr, concluded: “F2i joins the Ministry of Economy and Finance and three international investors in a systemic operation of paramount strategic and industrial value. F2i will carefully follow this important investment, supporting the company and its new management so that the objectives of the industrial plan already agreed between the shareholders and aimed at rapidly replacing the copper network with a fiber optic network are pursued, a necessary condition for digital transformation of the country.”
And Pietro Labriola, TIM’s ceo, commented “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”, stated Pietro Labriola, CEO of TIM. “We reached a milestone that is also a new starting point: we have done so by meeting all targets within the announced deadlines. We intend to continue along this path, further increasing the trust of our employees, our customers and our shareholders. 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. TIM will remain the reference Telco in Italy and will continue to be the country’s most infrastructure-rich operator, offering innovative services, across both fixed and mobile services, serving families, the Public Administration and businesses”.
The sale of NetCo, valued, as known, at up to EUR 22 billion including earn-outs linked to the occurrence of certain conditions, allows TIM to reduce its financial debt by EUR 14.2 billion, as already anticipated to the market. Adjustments and separation costs totalling EUR 400 million are also confirmed, resulting in an effective net of EUR 13.8 billion. Recall, in fact, that one of the main objectives of the transaction for TIM is to reduce the amount of debt weighing on the group, which at the end of 2023 amounted to EUR 32 billion adjusted gross, with net debt of EUR 25.6 billion (or EUR 20,3 billion after lease) just above the EUR 25.3 billion in 2022 (see here the presentation of TIM’s preliminary 2023 figures), vs. EUR 16.3 billion in revenues (from EUR 15.8 billion in 2022), an adjusted ebitda of EUR 5.7 billion (from EUR 5.3 billion) and a net loss of EUR 1.4 billion (from EUR 2.9 billion). Things did not change much at the end of Q1 2024, indeed (see TIM’s investor presentation for Q1 2024 here). The group’s adjusted after-lease net debt as of 31 March last reached EUR 26.6 billion (or EUR 21.4 billion after lease), up EUR 1 billion from 31 December 2023, vs EUR 3.93 billion in revenues (from EUR 3.85 billion as of 31 March 2023), adjusted ebitda of EUR 1.42 billion (from EUR 1.04 billion).
And again as already anticipated, following the sale, the relationship between NetCo and TIM is regulated through a Master Service Agreement (MSA) that has a duration of 15 years, renewable for a further 15 years, and services will be rendered at market prices and without minimum purchase commitments. Following the transaction, TIM’s total workforce will decrease from 37,065 to 17,281, equivalent to 16,135 full-time equivalents.
