Shares In TIM Surged On Report About Structure Of Broadband Deal

Telecom Italia (TIM) shares climbed more than 5% on May 31, pushed up by the most recent report on the structure of a deal to develop a combined broadband network with rival Open Fiber.

Both groups signed a preliminary agreement late on Sunday and daily Il Messaggero reported on Tuesday that state lender CDP would hold the majority share of the combined network, a project which has been proposed for years.

CDP, which already has a stake in the two businesses, is ready to own a 70-77% stake in the combined broadband network, the report said. Infrastructure funds KKR (KKR.N) and Macquarie will hold 10-13% and 12-15% of the entity, respectively, according to Il Messaggero, while Swisscom’s (SCMN.S) unit Fastweb will get a 1-1.5% stake.

None of the parties mentioned in the report gave comments.

Details of the deal, which could see TIM retain only a small stake in the combined entity or exit the fixed network business entirely, are due to be concluded by end-October. Sources have told reporters that options on the table include an absolute sale of TIM’s domestic landline grid in what could be a full-cash transaction.

Pietro Labriola, TIM Chief Executive, is considering recovering the debt-laden group’s fortunes through an allocation of its landline grid from service operations. Additional details could be provided at the company’s Capital Market Day on July 7.

The preliminary deal last week was also signed by KKR and Macquarie, which hold minority stakes, respectively, in Open Fiber and TIM’s final stage network business. TIM’s shares rose 5.3% by 0820 GMT, maintaining the upward trend for the week as the market embraced signs of progress on revamping the company.

Under pressure for years in its hyper-competitive domestic market, TIM is hoping to raise cash by selling off its landline network, an asset analysts value at between 15 billion to 20 billion euros.

Italy is eager to develop a single broadband network champion to refrain from duplicating investments across the country and to accelerate a fibre optic launch and digitalization of its economy.

($1 = 0.9302 euros)