Telecom Italia (TIM) has signed a non-disclosure agreement (NDA) with Italian state lender CDP and has started formal talks of a potential merger between the phone group’s network with that of smaller broadband rival Open Fiber.
The development comes at a time when TIM’s CEO Pietro Labriola is pushing ahead with a plan to revamp Italy’s biggest phone company centred around a split of its wholesale network operations from its service business.
The commencement of the talks marks TIM’s plan to chart a different course to a non-binding approach for all of its business made by U.S. fund KKR.
TIM has kept KKR waiting for four months before agreeing earlier in March to engage in talks, while pressing ahead with its standalone reorganisation to unlock what the group calls its “untapped value”.
According to a source familiar with the matter at hand, KKR is scheduled to say in a letter on Monday that it will not pursue a formal bid unless TIM grants it the due diligence the fund has been requesting for months, which has become more crucial as the market situation changes due to the Ukraine conflict.
TIM’s board is expected to discuss KKR’s letter and a separate proposal from private equity firm CVC for a stake in its enterprise service business on April 7.
Incidentally, Open Fiber is 60% owned by CDP, which in turn also owns 10% of TIM. As part of the tie-up plan, CDP would get control of the merged network, said sources which could ease antitrust concerns since TIM would no longer hold a majority.
According to sources, TIM might agree to a compromise with KKR by involving the fund in its plans for the Open Fiber tie-up.
KKR owns a 37.5% stake in TIM’s last-mile network.