Open Fiber-Tim, the challenge does not stop as two Boards of Directors approach for the national telephone battleship: the first, on Tuesday 30 October to speed up the sale of Persidera; the second, fixed for some time on 8 November, for the approval of the accounts as at 30 September. The spotlights are back on, fueled by the expectation of significant steps - which have not yet been taken - on the separation of the network and the possible unblocking of negotiations with Open Fiber which, in the meantime, continues on its way to build the new infrastructure in 100% optical fiber. All while the Tim governance is halfway between the Elliott Fund, which with 8,847% however has the majority of directors on the board, and Vivendi which, with its relative majority share of 26%, was forced into the minority after the shareholders' meeting May, does not make progress. Nor is it known how the Cdp, owner of 5% of the Telecom capital, will move after the changing of the guard wanted by the M5S-Lega government and the arrival at the top of Fabrizio Palermo. The only element of certainty that seems to emerge is the consolidation of the position and role of Tim's CEO, Amos Genish, who, contrary to what it seemed a few months ago, is destined to remain at the helm of the leading national telephone company at least until at the assembly next spring.
However, the unknowns remain many, aggravated by a difficult market environment that puts pressure on the stocks of the telecommunications companies. And the stalemate is also keeping the union in turmoil, worried about the risk of new redundancies beyond the 4.500 already declared by the company and for now "checked" with a solidarity agreement for 29.500 group employees. Mediobanca and Equita recently reduced the target price to discount the maxi-investment in 5G and updated the estimates for the third quarter to take into account the 2 million customers declared by Iliad in September. But in both cases the new target price is higher than the market price and therefore the opinion remains positive.
FIBRA, THE CDP-ENEL PLAN GOES ON
While waiting for decisions to be made, Tim and Open Fiber do not meet on the battlefield and each continues on his or her own path. Open Fiber, the public company born from the merger of Enel (50%) and Cdp (50%), goes ahead with its industrial plan: in the most competitive areas of the country, the so-called A and B, it has construction sites active in 100 cities out of 271 that the industrial plan envisages to wire in pure optical fiber (90% by 2023). Sales are open in 50 cities and customers already connected are a few hundred thousand in total. In areas with market failure, areas C and D, Open Fiber operates under concession on an Infratel mandate: there are 750 open construction sites in as many Italian Municipalities and they will become 1000 by the end of the year. In summary, a huge machine was quickly set in motion given that the Anac green light for tenders arrived in February.
Adding up, in all there are already 3,5 million units reached in FTTH, Fiber to the home, the optical fiber that arrives inside the building. Open Fiber's strategy, which has had the impetus and full support of the Renzi-Gentiloni governments, is clear: replicating multiple FTTH fiber networks, one for each operator, throughout the country is not a viable choice because it is too expensive; therefore the solution lies in the creation of a wholesale network to give ultra-fast Internet connection to all interested operators. And then, may the best man win. Strategy shared by Vodafone, Wind3, Tiscali (and a dozen other lesser-known operators) who have signed agreements with Of and have already started offering their customers the "Giga subscription" in cities such as Catania, Naples, Perugia as well as Bologna, Venice, Milan, Turin and so on. Work has also started in Rome which alone is worth a thousand small towns. The funding has arrived: in addition to the initial 950 million from the two partners Enel and Cdp, last summer the 3,5 billion Jumbo loan was launched by the EIB and the consortium of banks that support the project. Another 2 billion will come from the cash flow generated by management.
TIM RUNS ALONE
On the opposite side is Tim: he chose the mixed Fttc model, Fiber to the cabinet, the fiber goes all the way to the cabin on the road, from there on it's copper. Tim is not the only former monopolist to have chosen this network model which enhances the copper access network, a precious asset for Tim and still in the monopoly. Even BT in the UK has done the same but is now gradually shifting customers to FTTH which sooner or later will prevail – this is the trend worldwide – if only because fiber has management costs much lower than copper. And Tim is also investing in 100% fiber. Through Flash Fiber (80% Tim, 20% Fastweb) wants to connect 29 major cities by 2020. But the group led by Amos Genish also declares FTTH connections available in 116 municipalities for 2,9 million homes. It is clear that in the "rich" areas the Tim and Of networks will overlap and the cost will be paid by the two companies. On about 1/3 of the country - in the Infratel areas - the network will instead be Open Fiber. It remains to decide, essentially, what to do in the remaining third - that of the so-called gray areas - and here the fight will be tough also because the areas will have to be surveyed and are distributed patchily throughout the territory, with important industrial realities from North to South, such as Ferrari in Maranello or the Cis in Nola, a distribution center the size of a city.
Will Tim find an agreement with Open Fiber? This is not the air he blows, at least for now. Strengthened by its maxi-size and market positioning (52,6% of regular customers are his), Tim wants to go it alone, even if it remains the hub of resources. The group presented a Domestic Ebitda equal to 40% of 2017 revenues, and that's no small amount, but it has around 25 billion in debt, 50 employees (which Vivendi considers oversized compared to the other incumbents) and has pledged 2,4 billion for 5G mobile. An investment, the latter, which confirms the group's commitment to innovation but which nonetheless represents a considerable commitment of resources. The competitive pressure remains high on all the operators and the project for the separation of the access network in the Netco is entrusted to the times of the Communications Authority which should give some indications by the end of the year. The government is moving very cautiously: "There is Telecom that wants to spin off and sell the copper network - Minister Di Maio said in recent days - First of all, we need to understand if it is still a current thing". And if it is interesting - he added - to then accelerate on the fiber cabling of the whole territory.
In the meantime, how will the governance issue be resolved? How long will it take for Vivendi to overturn the balance of power in the board and regain management of the company? Between the assumptions of acceleration and subsequent braking, the goal everyone is looking towards is certainly the April assembly. Are advances possible? Arnaud de Puyfontaine, with French irony, advised journalists who from time to time present advances in this regard "to drink a little less Aperol Spritz because creativity is excessive and what I have read is not in the reality of the moment". But the issue remains open: not only because the Elliott Fund has already created the conditions for its future exit next year by covering part of its share with put and call options with JP Morgan but because it remains to be seen what CDP will do at that point : will he remain a shareholder of Tim (with 5%) and of Open Fiber (with 50%)? Today nobody knows.
