30/05/2022 10:33
The integration process of the TIM and Open Fiber networks takes shape with the signing of an initial agreement. The formalization arrived yesterday with the go-ahead from the board of directors …
The integration process of the TIM and Open Fiber networks takes shape with the signing of an initial agreement. The formalization came yesterday with the approval of the boards of directors of Open Fiber, Cdp and Tim to the letter of intent (Memorandum of Understanding, MoU) which aims to create a unique network. A formal decision, but not yet binding at the moment: the parties have, in fact, given five months, until 31 October, to make the agreement concrete. A first significant step but part of a still long and complex path, as emerges from the times that the parties have left to reach a binding agreement. A news that is supporting Tim in Piazza Affari, with the stock advancing by almost 3% to 0.2884 euros (Tim is trying to recover ground, with the 1-month performance equal to + 3.7%).
Now the key date is October 31: at the moment there is an agreement without constraints
After months of negotiations, the parties have undertaken to negotiate the terms and conditions of the transaction exclusively but without constraints with the aim of reaching the signing of any binding agreements by 31 October 2022. “Therefore, the signing of these agreements will be brought to the approval of the respective decision-making bodies and subject to obtaining the necessary authorizations (including those relating to antitrust) from the competent national and European Authorities”, reads the joint press release. Furthermore, regardless of the structure that may be ultimately identified and shared, the transaction will be submitted to the approval of the shareholders’ meeting of the tlc group led by Pietro Labriola.
“The objective – reads the joint press release – is to start a process aimed at creating a single telecommunications network operator, not vertically integrated, controlled by CDP Equity (CDPE) and participated by Macquarie and KKR, which will allow to accelerate the diffusion of optical fiber and VHCN (Very High Capacity Networks) infrastructures throughout the country, thus allowing access to the most innovative and efficient services offered by the market to the general population, public bodies and businesses, thus contributing to a more rapid, lasting and sustainable development of the country “.
As for the structure, “The print“On newsstands today reminds us that” every option is valid but the hypothesis of the sale, according to financial sources, is Tim’s favorite. The former monopolist’s network, from the backbone to the last mile and with this also the international part with Sparkle, would be sold to Open Fiber in exchange for the transfer of a large part of the debt or even with an all-cash payment, issues that will be now at the center of discussions “.
Returning to the official press release, the protagonists of the operation agreed that the whole could be articulated through the separation of the fixed network infrastructural activities from the commercial ones of Tim – through a corporate transaction or combination of corporate transactions to be defined – and the integration of the former with the network controlled by Open Fiber with methods to be defined. Once this operation is completed, on the Italian market, Tim will be able to focus its activities on telecommunications and data transmission services as a priority.
Waiting for the Capital Market Day (CDM) of 7 July
Looking ahead to the network spin-off project, Capital Market Day (CDM) on 7 July is also expected. “The statement shows that Tim is ready to completely decommission the network. However, the perimeter is not entirely clear, which could also include the backbone in addition to the access network and Sparkle “, commented the analysts of Equity according to which “la sale in full is preferable to the sale of the majority as it increases the proceeds for an asset that is no longer controlled and increases the chances of approval by the authorities“. The passage of the shareholders’ meeting, add the analysts of the Milanese sim, offers greater guarantees that it is an operation of interest for Tim shareholders and therefore it seems positive and appropriate, given the importance of the operation.
For Equita the network is worth 21 billion
No precise indications of value for the network emerged, which will be part of the negotiation. Looking at the numbers, however, the press articles indicate a range of 16-21 billion, with an average value of around 18 billion. In the Equita hypothesis, with the Netco perimeter outlined in March, we evaluate the network as 21 billion enterprise value and 5 billion equity pertaining to Tim. “The CMD may not yet have precise indications on the values of the network, but will be able to provide clarifications on the economics of the asset to be divested, and on the strategies of ServCo (and in particular of EnterpriseCo)”, add from Equita who confirm the hold recommendation on former monopolist.