As expected, TIM‘s Board of Directors yesterday approved the agreement with KKR Infrastructure fund and Fastweb relating to the establishment of FiberCop, the newco in which TIM’s secondary tlc network (from the street cabinet to the customers’ homes) and the fiber network developed by FlashFiber, the joint venture owned by TIM (80%) and Fastweb (20%) will be transferred (see here TIM’s press release).
The agreement may also involve other tlc operators, as it is already provided for in the memorandum of understanding signed by TIM and Tiscali last week (see here a previous article by BeBeez), and will allow TIM, Fastweb and the other tlc operators to co-invest by completing the fiber coverage plans in the black and gray areas of Italy and accelerating the adoption of Ultra-Broadband (UBB) services.
The agreement constitutes the first step for the implementation of a broader project to establish a single national network company, necessary for the digital development of Italy, which will involve OpenFiber, the dedicated company to optical fiber and owned by Cassa Depositi e Prestiti (Cdp) and Enel (see here a previous article by BeBeez).
The Boards of Directors of TIM and Cdp yesterday approved a letter of intent between TIM and CDP Equity (Cdp’s private equity arm) aimed at integrating FiberCop with OpenFiber, to create AccessCo, a company also open to other investors and destined to manage the single national network. AccessCo will be established through the merger of FiberCop, a company that at that time will include TIM’s primary and secondary access network, and Open Fiber, a company dedicated to optical fiber and owned by Cdp and Enel (see here Cdp’s press release). With Enel which is deciding to leave the game and could sell its 50% stake in OpenFiber to KKR itself or to an Australian infrastructure fund managed by Macquarie (see here a previous article by BeBeez).
More in detail, as already specified by TIM on the occasion of the half-yearly report at the beginning of August (see here a previous article by BeBeez), TIM will transfer its secondary network to FiberCop; TIM and Fastweb will transfer the FlashFiber activities to FiberCop; and KKR Infrastructure will capitalize FiberCop with 1.8 billion euros. All based on an enterprise value of approximately 7.7 billion euros (equity value 4.7 billions), with TIM holding 58% of FiberCop, Kkr 37.5% and Fastweb 4.5% ( see here TIM’s presentation to the analysts). It is expected that FiberCop will have an Ebitda of approximately 900 million euros and a positive EBITDA-CAPEX starting from 2025 and will not require capital injections from shareholders. The closing of the transaction is expected by the first quarter of 2021, once the authorizations of the competent authorities have been obtained.
In the meantime, the second phase of the project will be prepared, namely the establishment of AccessCo, from the merger between FiberCop and OpenFiber. Prior to the merger, TIM is expected to confer an additional business branch into FiberCop, which consists of the primary network functional to FiberCop’s operational activities. To this end, evaluations of the two assets will be carried out in the fourth quarter of the year. The due-diligence process is expected by the end of the year with a view to reaching a possible merger agreement no later than the first quarter of 2021.
According to the agreement, TIM will hold at least 50.1% of AccessCo and through a shared governance mechanism with Cdp Equity, the independence and impartiality of the company will be guaranteed. In this regard, qualified majority mechanisms and preventive control rules are envisaged. Cdp, through the subsidiary Cdp Equity, aims, with its shareholding in AccessCo, to ensure the presence of a long-term strategic partner. The closing of the transaction is subject to the authorizations of the competent authorities. TIM and Cdp Equity also undertake to evaluate other areas of possible cooperation to pursue the development of other technologies (5G, hedge computing, Data Center, Cloud and more), so as to facilitate the rapid introduction of innovative technologies that improve the accessibility of the Country.
