Por Elvira Pollina
MILAN, Italy (Reuters) – Telecom Italia has signed a preliminary agreement with Italian state investor CDP to combine fixed-line assets in a bid to pave the way for a single nationwide broadband network, the companies said late on Sunday.
Under the plan, Telecom Italia will merge its wireline network with that of CDP-owned broadband rival Open Fiber as part of the company’s turnaround efforts through a complete separation of its wireline network from service operations.
The preliminary deal was also signed by infrastructure funds Macquarie and KKR, which hold minority stakes, respectively, in Open Fiber and Telecom Italia’s network unit.
Both KKR and Macquarie will be minority investors in the single-network entity.
KKR decided to join the Telecom Italia-CDP project after the Italian company rejected a proposal to be acquired by the American company for 10.8 billion euros.
Telecom Italia shares rose as much as 4% in early trading, outperforming Italy’s blue-chip index.
CDP, which is Telecom Italia’s second largest investor with a 10% stake, owns 60% of Open Fiber and will control the combined network, according to a statement. The parties aim to negotiate a binding agreement by the end of October.
A deal will be subject to approval by national antitrust authorities and the European Union. Telecom Italia shareholders will also have to approve. Analysts estimate that completion of the transaction will take up to two years.
Italy wants to create a single broadband network to avoid duplication of investments and accelerate the deployment of optical fiber and the digitization of its economy.
Telecom Italia shares are down 38% from the start of this year to Friday’s close.
The separation of its network infrastructure will give Telecom Italia the resources to develop data and connectivity services for consumers and businesses, Chief Executive Pietro Labriola said in a message to employees seen by Reuters on Monday.
