TIM shares rise on report about shape of broadband deal

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MILAN — Shares in Telecom Italia rose more than 5% on Tuesday, boosted by the latest report on the structure of a deal to create a combined broadband network with rival Open Fiber.

The two groups signed a preliminary agreement late on Sunday and daily Il Messaggero reported on Tuesday that state lender CDP would hold the lion’s share of the combined network, a project which has been mooted for years.

CDP, which already has a stake in both businesses, is set to hold a 70-77% stake of the combined broadband network, the report said.

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According to Il Messaggero, infrastructure funds Macquarie and KKR will hold 12-15% and 10-13% of the entity, respectively, while Swisscom’s unit Fastweb will get a 1-1.5% stake.

There was no comment from any of the parties mentioned in the report.

Details of the agreement, which could see TIM exit the fixed network business entirely or retain only a small stake in the combined entity, are due to be finalized by the end of October.

Options under discussion include an outright sale of TIM’s domestic landline grid in a what could be a full-cash transaction, sources have told Reuters.

TIM Chief Executive Pietro Labriola is looking to revive the debt-laden group’s fortunes via a split of its landline grid from service operations. More details could be fleshed out at the company’s Capital Market Day on July 7.

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The preliminary agreement on Sunday was also signed by Macquarie and KKR, which hold minority stakes, respectively, in Open Fiber and in TIM’s last-mile network business.

Shares in TIM were up 5.3% by 0820 GMT, continuing the positive trend for the week as the market welcomed signs of progress on reshaping the company.

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

Italy is keen to create a single broadband network champion to avoid duplicating investments across the country and to speed up a fiber optic roll-out and digitalisation of its economy. ($1 = 0.9302 euros) (Reporting by Cristina Carlevaro and Elvira Pollina Writing by Keith Weir Editing by Agnieszka Flak and Jane Merriman)