TIM's enterprise unit attracts investor interest

Investment funds are continuing to circle Telecom Italia (TIM), which is already grappling with one major offer from US investor KKR. The Italian group has now confirmed that it received a "non-binding proposal" from UK-based CVC Capital Partners for a minority stake in a unit that doesn't yet exist in a standalone form.

CVC is interested in investing in a new services unit that would emerge once the operator has completed a revamp proposed by new CEO Pietro Labriola.

The CEO's plan is to hive off the group's Italian fixed network and separate the operator into two units. As outlined by TIM earlier this month, a unit called "NetCo" would incorporate the operator's fixed network assets as well as the domestic wholesale and Sparkle's international businesses. "ServCo," meanwhile, would hold the enterprise services division as well as Noovle, Olivetti, Telsy and Trust Technologies.

Figure 1: CEO Pietro Labriola's plan is to hive off the group's Italian fixed network and separate the operator into two units.
(Source: Reuters/Alamy Stock Photo)

According to Reuters, CVC has proposed buying a 49% stake in any resulting ServCo, now referred to by TIM as "newco." TIM's board is expected to have a first look at the proposal during a meeting on Tuesday.

KKR still in the frame

The group also confirmed that discussions with KKR on "the attractiveness, actuality and deliverability" of the US investor's €10.8 billion (US$11.86 billion) offer are ongoing. KKR launched its bid to buy TIM and take it private in November 2021, but the operator only started formal talks to assess the offer around two weeks ago.

At the same time, the operator is continuing negotiations with state lender CDP on a possible merger with state-backed broadband provider Open Fiber — reviving a long-standing plan to create a single fiber network company in Italy. CDP owns a 9.1% stake in TIM and 60% of Open Fiber.

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Although TIM has kept KKR waiting for several months, the investor is apparently still interested in pursuing its bid. Reuters has reported that KKR also still intends to carry out due diligence, but has narrowed the scope of the information it requires.

What's more, KKR also reportedly wants to discuss the implications of an Open Fiber merger. KKR's plan for TIM is said to be similar to that presented by Labriola, in that both propose separating infrastructure assets from services operations.

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— Anne Morris, contributing editor, special to Light Reading