FiberCop is go after KKR and Fastweb firm up stakes

It's been several months in the making, but FiberCop, Italy's last-mile network grid, has finally moved into the operational stage with an enterprise value of €7.7 billion (US$9 billion).

Telecom Italia (TIM) announced the completion of shareholder agreements with KKR Infrastructure and Swisscom-owned Fastweb, meaning that KKR has acquired a 37.5% stake at a value of around €1.8 billion ($2.1 billion). Fastweb has also transferred its 20% stake in FlashFiber, its joint venture with TIM (which holds an 80% stake), into FiberCop and taken a 4.5% stake.

FiberCop now combines TIM's secondary network (from the street cabinet to customers' homes) and the fiber network developed by FlashFiber.

Elephant in the room

TIM made no mention of the ongoing investigation by Italy's competition authority Autorità Garante della Concorrenza e del Mercato (AGCM), which said in December it would investigate agreements around creating the FiberCop network, and supply agreements with Fastweb and Tiscali.

Since then, it seems that little has been revealed about the progress of the investigation. At the time, AGCM said it wanted to ascertain that agreements between the various operators would not hinder competition in the medium and long term, "and are aimed at ensuring the rapid modernization of the country's fixed telecommunication infrastructure."

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TIM clearly feels confident enough to press ahead regardless. The operator said FiberCop is expected to generate annual EBITDA of around €900 million ($1.05 billion) and will have positive EBITDA minus capex from 2025.

The operator also again referred to the "co-investment" plan it unveiled in January, when it invited all interested operators to participate in the construction of a secondary access network, to accelerate the rollout of fiber-to-the-home (FTTH) services across Italy. It noted that this plan has already been submitted to the competition authority.

Fiber twists

Pending government approval, the eventual aim is to merge FiberCop with Italian wholesale broadband operator Open Fiber to form a big fiber provider called, at least provisionally, AccessCo. TIM has said it wants to own at least 50% of any single network company.

Open Fiber is jointly owned by Italian utility Enel and state lender Cassa Depositi e Prestiti (CDP). Enel has been in talks to sell up to 50% of Open Fiber to Australian fund Macquarie for €2.65 billion euros ($3.11 billion) since last year and a deal is expected to be completed by June.

However, as if the whole FiberCop/Open Fiber farrago was not complicated enough, rumors are now circulating that changes to the Open Fiber plan are afoot.

According to Reuters, the original scheme envisaged CDP buying 10% of Open Fiber from Enel and negotiating governance rights with Macquarie to secure control. Now, it seems that Italy wants to find a less expensive route following disagreements over the value of Open Fiber.

Quoting unidentified sources, Reuters said the new scheme under discussion would see Enel sell all or part of its 50% stake to Macquarie, after which CDP would raise its stake to 51% through a capital increase.

Clearly, many details of Italy's fiber saga remain to be resolved.

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— Anne Morris, contributing editor, special to Light Reading

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