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Strategic Sale of Fixed-Line Grid to KKR Consortium Significantly Reduces Telecom Italia’s Debt

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The atmosphere at Telecom Italia (TIM) headquarters in Rome was undoubtedly celebratory this week. The company, led by a relieved CEO, announced the successful completion of a strategic plan to sell its fixed-line grid to the Optics BidCo consortium. This consortium is controlled by investment firm KKR.

“The completion of the transaction with KKR and the Italian Ministry of Finance is the result of two and a half years of intense work, during which we have improved the management of TIM and identified industrial and financial solutions that will enable us to meet future challenges,” said TIM CEO Pietro Labriola.

TIM’s sale of NetCo, valued up to €22 billion (approximately $23.6 billion), enables the company to reduce its significant net financial debt by about $13.8 billion. As of March 31, 2024, TIM’s adjusted net financial debt was €26.6 billion. Post-transaction, net debt reduced to €21.4 billion after leases.

NetCo comprises TIM’s primary and backbone fixed-line network business, as well as FiberCop. FiberCop is a joint enterprise between TIM and KKR that includes TIM’s secondary fixed-line network. Following this transaction, TIM’s total workforce will decrease from over 37,000 to around 17,000.

“As the first European mover, we chose to separate the fixed network infrastructure services from the other services we provide, to ensure the best, sustainable and fastest possible development of TIM,” stated Labriola.

The strategy to divest NetCo began in July 2022 when Labriola confirmed the management board’s decision to separate the fixed-line network infrastructure from the service and customer-facing aspects of the company. KKR made a binding offer for NetCo in October 2023, and the European Commission approved the transaction by June 2024.

Going forward, TIM will operate as a service company (ServCo), retaining its retail and enterprise businesses, mobile network, and TIM Brasil. Additionally, TIM retains ownership of its wholesale unit Sparkle, though it is also potentially up for sale.

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