Double green light and first concrete step forward on the road to a new digital fiber optic network and, further on, a single national network. Tim's board, as expected, approved the deal with the KKR fund. FiberCop is born, the new company which will be assigned the secondary copper network (from the street cabinets to the houses) owned by the telephone group. It will also flow into society the fiber network of FlashFiber, the joint venture between Tim (80%) and Fastweb (20%). Also Tiscali which signed a memorandum of understanding just in recent days, will participate in the deal which is expected to be concluded within the first three months of 2021.
But the spotlights of the investors, who rewarded the Telecom Italia share during the day and then retreated below 40 basis points at the end, were all focused on the green light that the boards of directors of Tim on one hand and CDP on the other, they gave to the memorandum of understanding that will lead FiberCop to merge with Open Fiber, giving life to the future single national network.
It is a step that was anticipated by the go-ahead from the government in recent days, after the irregular stoppage that arrived on August 4 to the Tim board of directors in the process of approving the agreement with KKR. A stop required precisely to focus on the foundations on which to carry forward the single national network project and to reconcile Tim's request to control the company to be set up at 50,1%, with the need to guarantee governance such as to ensure independence of the newco and equity of access to all operators, as recently requested by Vodafone, Wind Tre and Sky. A "crucial" requirement not only to involve Tim's competitors but also to obtain the green light from the European Antitrust, a step that is not at all obvious.
FIBERCOP AND THE AGREEMENT WITH KKR AND FASTWEB
TIM has accepted the binding offer of €1,8 billion from KKR Infrastructure – explains the press release issued by the company late Monday evening – which will acquire 37,5% of FiberCop, on the basis of an enterprise value of approximately 7,7 billion euros (of which 4,7 billion euros in equity, the the rest is debt), while Fastweb will have 4,5% of FiberCop following the contribution of the 20% currently held in FlashFiber. Tim will control 58% of the new company thanks to which he plans to accelerate the transformation of the last mile of the network in a digital key. The group stressed that FiberCop will make use of the FlashFiber fiber network and aims to reach 2025% of the real estate units in gray and black areas (i.e. intermediate and fully market areas) by 76. In the white areas (those where the traffic does not guarantee returns to the operators and the State intervenes) we will continue with the already started construction sites.
Finally FiberCop will be a lean company with 100 employees, according to the shareholders' forecasts, will have an EBITDA of approximately 0,9 billion euros and positive EBITDA - CAPEX starting from 2025 and will not require capital injections by shareholders, concludes Tim's press release.
FIBERCOP AND THE NEW UNIQUE NETWORK WITH OPEN FIBER
The agreement reached with KKR will relieve Tim's debt and is aimed at accelerating the digitization of the last mile of the network in 1 Giga fiber optics. It's also the first piece, Tim points out, verse the new single national network project (AccessCo) which will arise from the merger of FiberCop and Open Fiber, the 50-50 joint venture between Enel and Cassa depositi e prestiti which is advancing with a fiber-only network in Italy. Just as Tim gave his go-ahead to the Memorandum with Cdp, at the same time the Cdp board took the same decision. Before the merger, Tim is expected to transfer its primary access network (fiber optic from the exchanges to the street cabinets) to the new AccessCo which it will control with at least 50,1% while Cdp Equity will guarantee the independence and openness of the network . The press releases do not mention how this will be ensured, but there has been talk of entrusting the presidency of the company to Tim and the managing director to Cdp Equity. There due-diligence is expected at the end of the year and the merger agreement no later than the first quarter of 2021. Provided that the company receives the green light from the European Antitrust. The company will be open to co-investment by other operators.
The path towards the new single network thus seems to have started, after so many years of discussions, but there are still many complex and not at all obvious steps to be taken, so much so as to arouse the perplexities of experts such as Franco Bernabè, former CEO of Tim and now president of Cellnex, who expressed more than one doubt in an interview with Repubblica on the convenience of the operation at the point at which it has been reached. A commercial agreement between Tim and Open Fiber or a co-investment agreement in the most critical areas is judged less costly and more effective.
Of a different opinion Fabrizio Palermo, CEO of Cdp, who underlines how the commitment of the public group "in this dossier has been maximum". For CDP, it is a matter of guaranteeing the presence of a strategic partner with a long-term perspective for the project. “With the support of the shareholders – he added – we have traced the path which, after approval by the regulatory and supervisory authorities, will allow us to create a latest generation TLC network, necessary for the country's competitiveness and crucial for the revival of the economy. In this context, Open Fiber continues to play a fundamental role for CDP which will increasingly consolidate in the path towards the creation of the single network". For the president of CDP, Giovanni Gorno Tempini moreover, the single network operation is "necessary to overcome the digital divide throughout the national territory from a system perspective and to contribute to the development of the country". Pending the FiberCop-OF merger, CDP "remains strongly committed to the implementation of the Open Fiber business plan".
