Unraveling TIM’s Fixed-Line Network Sale to KKR: Key Stakeholders’ Views

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Telecom Italia (TIM) has greenlit the sale of its fixed-line network to the US-based equity firm KKR for €18.8 billion. The conclusion of this sale will result in the branching out of the fixed-line business into a separate entity, named as NetCo.

This decision arrived subsequent to several board meetings that took place over at TIM which took place from the 3rd to the 5th of November. These sessions were specifically held to scrutinize the binding offer from KKR that had been placed back in October. Out of a fourteen-member board, eleven gave the go-ahead for the acquisition.

Simultaneously, the same board dismissed a non-binding offer from KKR for the company’s subsea cable unit, Sparkle. The reasoning behind this decision was that the offer in question was deemed inadequate, leaving room for KKR to present a more appealing proposal until the deadline on the 5th of December.

This sale of NetCo will notably assist TIM in reducing its current debt pile that exceeds €26 billion by a significant €14 billion. This financial relief can potentially enhance TIM’s capacity to compete more effectively in the market.

The deal has been endorsed by the Italian government as well. The decision was made earlier this year for the government to lock in the right to claim a stake of up to 20% in NetCo for €2.2 billion. This is based on the notion that TIM’s networks are a significant national infrastructure element. The transaction is also seen as a developmental step toward creating a single national fibre network through merging NetCo with OpenFiber, a fibre rival.

However, this deal has been met with some resistance from the French media titan Vivendi, the largest shareholder for TIM with a share of 23.75% of the company. The firm disputes the offer from KKR, arguing that the current assets of TIM are worth approximately €30 billion and as such, are being underestimated. Vivendi also asserts that TIM was negligent in requesting a shareholder vote on this momentous decision, constituting a breach against the intended governance rules.

Vivendi denounced the decision as “illegal” and vowed in a press release to utilize “all legal means at its disposal” to challenge it. The firm even threatened to set off a legal battle if the offer from KKR was approved without being submitted to a shareholders’ meeting where Vivendi holds significant influence. Vivendi closed their statement on this by claiming that “The rights of Telecom Italia shareholders are being trampled on”.

The transaction is expected to reach its conclusion in the summer of next year.

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