Telecom Italia (TIM) and Italian state lender CDP approved a preliminary agreement in order to create a national ultrafast grid operator combining the network assets of TIM and smaller rival Open Fiber.
The creation of the new network operator, promoted by the government in Italy, will help Italy close its digital divide with other European countries.
TIM approved the sale of a 37.5 percent stake of a new unit to U.S. investment firm KKR. TIM is transferring into the unit its last-mile network going from street cabinets to customers’ homes.
Swisscom’s Fastweb will own 4.5 percent of the new company, called FiberCop, which will work to switch TIM’s last-mile mainly copper grid to fiber.
TIM’s board also agreed to sign up to a broader government brokered process to create a single national network by merging FiberCop into state-backed Open Fiber, a wholesale-only ultrabroadband unit partly owned by CDP.
The state lender is TIM’s second largest shareholder after France’s Vivendi.
TIM said it would own at least 50.1 percent of the newly merged entity into which it would also transfer its primary network, going from switching centres to the street cabinets.
It added the independence and third-party status of the company would be guaranteed by a shared governance mechanism with CDP, which would emerge as a major shareholder in the venture, open to other players.
A due diligence process will define the value of network assets which will be folded into the new company with the aim of reaching a deal by the first quarter of next year, TIM said.
FiberCop will be assigned a network asset that already offers 85 percent of the population UBB speed thanks to FTTC and FTTH technology.
FiberCop will go on to assure FTTH coverage, with a connection speed of 1 Gbps, with the aim of reaching 76 percent of grey and black area property units, equating to coverage of a total of 56 percent of the country’s technical property units, by 2025. In the white areas TIM will continue the UBB deployment already in progress.
The new company – of which TIM will hold 58 percent, KKR Infrastructure 37.5 percent and Fastweb 4.5 percent – will offer passive access services of the secondary copper and fibre networks to all operators.
FiberCop will rely on the fibre infrastructure already installed by FlashFiber, without any duplication of investments and with maximum efficiency, at the same time promoting competition.
TIM will be the exclusive supplier for the construction and maintenance of the networks and will provide additional services to FiberCop, which will have a streamlined structure with less than 100 employees.
The operation will speed up the switch of customers from copper to fibre and will help reduce the digital divide in Italy.
TIM has accepted the binding offer of 1.8 billion euros from KKR Infrastructure, which will buy 37.5 percent of FiberCop, on the basis of an enterprise value of 7.7 billion euros (equity value 4.7 billion euros).
Fastweb will have 4.5 percent of FiberCop following the contribution of the 20 percent currently held in FlashFiber.
It is expected that FiberCop will have EBITDA of around 0.9 billion euros, positive EBITDA – CAPEX starting 2025 and will not require capital injections from shareholders.