The sale of TIM’s fixed-line infrastructure is not expected to affect competition at the wholesale level, but the Government will be watching developments closely
TIM receives EC clearance to sell ‘NetCo’ to KKR
On 30 May 2024, the EC approved unconditionally the acquisition by US investment firm KKR of NetCo, the primary and backbone fixed-line network business of former Italian incumbent TIM and FiberCop (the latter is a joint venture between TIM and KKR comprising TIM's secondary fixed-line network). The EC concluded that the transaction – worth up to €22bn (£18.7bn) – would raise no competition concerns in the European Economic Area (EEA). As part of the transaction, KKR and TIM have developed a master services agreement (MSA) that will govern the future relationship between NetCo and TIM. The EC found that the MSA is not an integral part of the deal, although it remains reviewable under EU or Italian competition law, as well as subject to regulatory oversight. Post-transaction, NetCo will offer, among other providers, wholesale fixed access services over both copper and fibre, making for a unique market structure where the former incumbent has sold off fixed-line infrastructure, among other things, to reduce its debt pile.
The deal was found to not raise competition concerns in the wholesale broadband access market
The primary focus of the EC’s investigation was the impact of the transaction on the market for wholesale broadband access services in Italy. In particular, the EC found that:
KKR would not have the ability to restrict access to passive services (i.e., infrastructure). For each wholesale product, the number of available networks and providers will stay the same, and NetCo’s market power will not materially increase as compared to TIM or FiberCop today. The existing long-term agreements with access seekers, including Fastweb and Iliad, which have been entered into after the creation of FiberCop in 2021, ensure that KKR will not be able to deteriorate the conditions for wholesale access or terminate such access; and
The transaction would not increase the likelihood of coordination between NetCo and its long-standing competitor Open Fiber, given that Fastweb will continue to exert competitive pressure on both providers. In addition, NetCo and Open Fiber will likely continue to compete, both to attract new customers and to roll out fibre networks, either in new areas or in each other's areas.
Italy’s Government approved the acquisition on national security grounds, but will keep a watchful eye on developments
The transaction had already received clearance (subject to certain conditions and safeguards) from the Italian Government under its ‘Golden Power’ rules that limit foreign investment in domestic firms. The state will supervise all matters that relate to defence and security, and has also announced its intention to take a 15-20% stake in NetCo to further shore up its influence over nationally-important assets. The deal appeared to be at risk after Vivendi (TIM’s largest individual shareholder) argued KKR’s bid undervalued the network and that it would be launching a legal challenge. However, while Vivendi’s lawsuit disputed the legitimacy of the Board’s resolution to confirm the sale, it did not request an urgent injunction to prevent its execution. TIM therefore believes that approval by the EC in Phase 1 means the deal will be completed on schedule, i.e. in summer 2024.
