In the latest consolidation move in the Italian market, Reuters has reported that Telecom Italia has presented a list of funds to Open Fiber that may be willing to buy into the company, as a precursor to creating a single fibre network in the country.
The Italian government is keen to avoid overbuilding and favours a single nationwide fibre network. This aim has been hampered, however, by a series of problems – including, how to value Open Fiber, where funding will come from, where Open Fiber would sit within Telecom Italia, and whether antitrust issues will be thrown up by the consolidation.
Open Fiber was founded four years ago (December 2015) by utility company Enel, as a wholly-owned subsidiary. Its aim was to build an independent fibre-based network and rival to Telecom Italia (an Altnet). In July 2016 it bought Metroweb Italia, with Metroweb Italia’s investor Casa Depositi e Prestiti (CDP) acquiring a 50% stake in Open Fiber. CDP is also Telecom Italia’s second biggest investor, after French media giant Vivendi, and has ties with a series of sovereign wealth funds including Qatar and Kuwait. In 2018, Open Fiber announced that Sky Italia would use its fibre-to-the-home (FTTH) network to deliver content.
Enel has valued Open Fiber at EUR8 billion, which is somewhat north of the EUR1.5-4.0 billion analysts have placed on the business.
According to Reuters, Telecom Italia is considering setting up a special purpose vehicle (SPV) for infrastructure funds and has pitched the project to Australian investment bank Macquarie. While financial sources caution that the deal is at an early stage, under this scheme Enel would sell its stake in the fibre business and exit the market. The deal values Open Fiber in the middle of the spectrum at EUR5-6 billion, which would leave Enel with EUR2.5 billion if it chose to sell.
Relationships between Telecom Italia’s two biggest shareholders (Vivendi and Elliott) have thawed in recent months, renewing the likelihood of a deal with Open Fiber and the conversion of TIM’s savings shares. Its Chairman, Fulvio Conti, resigned yesterday, with Michele Valensise taking over on an interim basis.