February 26, 2020 / 9:35 AM / a month ago

Italy seeks to end ultra-fast broadband stalemate

MILAN (Reuters) - Italy on Wednesday urged Telecom Italia and fibre-optic rival Open Fiber to quickly find an accord to merge their ultra-fast broadband assets, seeking to end a stalemate over an infrastructure the government deems strategic.

Rome is trying to engineer a deal between former phone monopoly Telecom Italia and smaller rival Open Fiber to create a single ultra-fast broadband operator to avoid duplicating investments costing billions of euros.

Talks between Telecom Italia (TIM) and Open Fiber’s owners - utility Enel and state lender Cassa Depositi e Prestiti (CDP) - on combining their fibre broadband operations have dragged on since June but sources have said an agreement has proven tough to hammer out.

CDP is also the second largest shareholder in TIM with a 10% stake. TIM’s leading shareholder is French media group Vivendi with a 24% stake. U.S. investment fund Elliott has around a 9.8% stake.

The government wants to create a nationwide network while also keeping some form of state oversight.

Economy Minister Roberto Gualtieri said on Wednesday an ultra-fast broadband network was a strategic asset for the country and on which speedier progress was necessary.

“The government encourages constructive discussions among parties to set conditions to integrate existing assets,” Gualtieri said in a statement.

Over the past few months, in a bid to press ahead with a deal with Open Fiber, TIM has asked infrastructure funds to evaluate an investment in a potential combined fibre-optic entity.

Sources have said that, under TIM’s plan, a financial partner could help the former monopoly to buy Enel’s stake in Open Fiber while TIM would fold in its own so-called last-mile assets, which connect homes to the network.

But Enel’s boss Francesco Starace has shown little enthusiasm for selling its Open Fiber stake.

In comments later on Wednesday Enel said it agreed on the need to provide the country with an ultra-fast broadband network.

“We are committed to rolling out nation-wide this infrastructure and look with great favour at any initiative... aimed at facilitating and speeding up the move,” it said.

In a newspaper interview on Wednesday, TIM Chairman Salvatore Rossi said a quick solution on a potential unified fibre-network project was needed.

“A company such as TIM, which competes on the market, cannot wait too long,” he said.

Rossi also said TIM should remain in charge of the combined network once any deal went through because of its maintenance and investment capabilities.

Open Fiber Chairman Franco Bassanini said late on Wednesday a single broadband operator could be an option but only if the competition watchdog set the conditions.

Earlier this month, sources familiar with the matter said that TIM was set to pick private equity firm KKR as a partner in a potential deal with Open Fiber.

One of the sources had said the U.S. investment firm had also expressed interest in investing in the former phone monopoly’s secondary network - the part that connects street cabinets to subscribers’ homes - which it values at 7.0-7.5 billion euros.

A TIM board meeting scheduled for Feb. 27 may discuss KKR’s proposals but no decision is expected, a source with knowledge of the matter said.

Reporting by Elvira Pollina, Valentina Za, editing by Gianluca Semeraro/David Evans/Jane Merriman

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