Italy’s TIM and CDP considering preliminary deal on single network, sources say | Investment News

MILAN (Reuters) – Telecom Italia (TIM) is considering a preliminary deal with state lender CDP over a long-running plan to merge TIM’s network assets with those of state-backed rival Open Fiber as early as next week , two sources said on Friday. .

Under pressure for years in its hyper-competitive home market, debt-ridden TIM last month began formal talks with CDP to relaunch a plan to create a single broadband network champion.

The negotiations came at a time when TIM CEO Pietro Labriola, who took over the company in January, is working on a proposal to break up TIM’s operations in a bid to unlock value and close deals. merger and acquisition agreements.

As part of such a plan, Labriola said the former telephone monopoly was open to giving up control of its network infrastructure as a way to facilitate a merger deal with Open Fiber.

As part of the overhaul, most of TIM’s network assets would be split into a separate unit, called NetCo, which would absorb a significant portion of the company’s debt and domestic staff.

The sources said TIM and CDP were finalizing a draft framework agreement which could be discussed at a Telecom Italia board meeting scheduled for May 26, warning that the non-binding agreement could still be delayed.

Italy is keen to create a single network champion to avoid duplication of investments and accelerate the deployment of optical fiber across the country.

Treasury-controlled CDP, which is TIM’s second largest investor with a 10% stake and owns a 60% stake in Open Fiber, is aiming to gain full control of the combined network entity, sources have previously said. .

Infrastructure funds Macquarie and KKR, which hold minority stakes in Open Fiber and TIM’s network respectively, were also involved in the talks, as their support would be essential to the realization of any project.

KKR, which spent 1.8 billion euros to buy a 37.5% stake in Telecom Italia’s last mile network unit, FiberCop, and attempted an unsuccessful takeover approach for all of TIM , expressed concerns about potential future regulatory and valuation issues related to the single network plan.

But a source familiar with the matter said the fund would not oppose the framework agreement.

(This story refiles to correct reference to Macquarie and KKR in paragraph 9)

(Reporting by Elvira Pollina; Editing by Keith Weir)

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