TIM, CDP set to start formal talks for network deal - sources

Dundas Minerals

31/03/2022 16:15

By Elvira Pollina
    MILAN, March 31 (Reuters) - Telecom Italia (TIM)  TLIT.MI 
and state lender CDP are expected to start formal negotiations
over a potential merger of TIM's  network assets with those of
state backed Open Fiber, two sources familiar with the matter
said.
    The negotiations would come as TIM boss Pietro Labriola
presses ahead with a standalone plan to revamp Italy's biggest
phone company centered around a split of its wholesale network
operations from its service business.
    The sources said CDP and TIM are expected to ink a
confidentiality agreement (NDA) in the early days of April.
    While discussions with KKR  KKR.N  over the U.S. fund's 10.8
billion euro ($12 billion) takeover approach for TIM are
ongoing, TIM and CDP's plans to sign off on an NDA would mark a
further step in an alternative direction.
    TIM and CDP declined to comment. CDP, which owns a 10%
holding in TIM, controls a 60% stake in its smaller rival Open
Fiber.
    A combination of the two networks has long been discussed
and is seen by CDP as a way of avoiding costly duplication of
investment needed to upgrade the national network for Italian
households and businesses but a deal proved elusive so far.
    A top government adviser said last week the combination
remained a government goal.
    
    PRICE GAP    
    KKR, which has already invested 1.8 billion euros for a
37.5% stake in TIM's last-mile fixed-line network last year,
submitted an indicative bid to buy the group in November.
    While a merger of Open Fiber was not part of KKR's plans for
TIM, the fund wants to discuss with the company the antitrust
implications of a such a deal and how it can create value for
the FiberCop business in which KKR is already an investor.
 urn:newsml:reuters.com:*:nL5N2VR4C2
    TIM's top shareholder Vivendi  VIV.PA  has billed KKR's
proposal as too low even though it was pitched at 0.505 euros.
TIM shares traded 8% lower at 0.33 euros on Thursday.
    TIM left the New York-based fund waiting for nearly four
months without an answer before agreeing earlier in March to
engage in talks, while pressing ahead with its standalone
reorganisation to unlock the group's "untapped value".
    In a letter this week TIM requested KKR to clarify by next
Monday whether the price of 10.8 billion euros for the equity
was confirmed, as well as whether its due diligence would only
have a confirmatory nature as requested by the phone group, 
sources said.  urn:newsml:reuters.com:*:nL5N2VW1LY
($1 = 0.9021 euros)

 (Reporting by Elvira Pollina
Editing by Keith Weir)
 ((elvira.pollina@thomsonreuters.com;))