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How it will be and how much will the company be worth for a single Tim-Open Fiber network

How it will be and how much will the company be worth for a single Tim-Open Fiber network

With the initials of Mou da Cdp, Macquarie and Kkr to integrate Tim's network with that of Open Fiber, the company's project of the Unica Network officially starts. Here is the possible structure and value of the newco controlled by CDP. Facts, numbers and insights

The process for the creation of the single network company from the integration of the Open Fiber and Tim infrastructures has officially started.

On May 29, the boards of Open Fiber, Cdp, Tim, Macquarie (which holds 40% in Open Fiber) and Kkr (37.5% shareholder of Fibercop, Tim's secondary line) gave the green light to the letter of intentions (Mou) to start the integration process of the TIM and Open Fiber networks.

But between now and October 31, the deadline indicated by the MoU, some knots will be resolved. First of all, the perimeter (and the workforce it includes) of the company including part of the debt to be defined, the governance of the newco and third, currently the most complicated, the enhancement of the assets that will flow into it.

Because people have already heated up on the valuation of assets (Tim's Netco and Open Fiber). The first to draw the ax in recent days was the shareholder Vivendi, Tim's first shareholder with 23.75%. " Vivendi will never support the sale of the network to the values ​​you mentioned (between 17 and 21 billion, ed ), and this is in Tim's best interest ”, ruled the number one of the French group Arnaud de Puyfontaine to the newspaper la Repubblica .

Even if – according to Reuters sources – Tim itself values ​​the fixed network assets involved in the sale process at around 20 billion euros. This valuation includes the debt component (12 billion) that would be transferred to the new company.

On the other side of the negotiation there is Cassa Depositi e Prestiti, which takes care of the direction of the entire operation. In fact, at the moment the basic scenario is that Tim sells the NetCo to Cdp which will then merge it with Open Fiber. Therefore the interests of Vivendi, “Tim and Kkr collide with those of Cdp and Macquarie” summarizes Il Sole 24 Ore.

Here's what emerged from the press leaks.

THE NEWCO STRUCTURE FOR THE SINGLE NETWORK

According to the draft of the project viewed by the Messenger , “it appears that Cassa Depositi e Prestiti will have 70-77% of Newco, Macquarie 12-15%, Kkr 10-13%, Fastweb 1-1.5%”.

“It is also not excluded that Tim may keep a small stake in the company whose model will be the one already practiced by Open fiber, ie wholesale only”, highlights Adnkronos.

So much so that according to some insiders heard by the press agency, a possible participation of Tim in the newco could be the 'vehicle' for the single network. In fact, it is recalled that already in August 2020 Tim and Cdp had signed a Mou for the single network which was wrecked shortly after. In fact, at the time, the project envisaged Tim's entry into the future network company with a majority stake. This time the group led by Pietro Labriola has given up on control of the future company.

In fact, Cdp (60% shareholder of Open Fiber and 10% of Tim) will have control of the single network company.

The latter choice was also rewarded by the market, with the rise in the Tim share, positively judging the fact that Cassa Depositi e Prestiti has control of the infrastructure, in order to facilitate approval by political and regulatory bodies.

THE GOVERNANCE

Although the process is long with many aspects yet to be defined, according to Il Messaggero there is no doubt about who will lead the future single network: “Mario Rossetti, Cdp man at the helm of Open FIber”.

THE WORK FORCE

As for the workforce to be brought into the new company, a lot depends on the perimeter it will take on, stresses Adnkronos . According to union sources, the order of magnitude is 20-25 thousand employees.

THE REASSETTING OF TIM

The signing of the MoU "is the first step in a courageous plan for Tim", underlined Tim's CEO, Pietro Labriola. “From the separation of the fixed network infrastructure we draw the resources to invest in services and in the development of relationships with customers and mobile, competing more easily in the digital services market”, continued Labriola.

According to Il Messaggero , there is a hypothesis of "separation of the network in Netco into which Sparkle will converge while the commercial part would be joined in three by Tim: Tim Brasil, who is already autonomous, the Enterprise with Noovle inside, Olivetti IoT, Telsy (where there are offers from Cvc and Apax) and the mobile part.

"Tim should then bring the primary and secondary network (Fibercop) including the backbon which is the transport network of the network exchanges in a Newco in which Cdp and Macquerie would bring their shares in Open Fiber" concludes Il Messaggero.

THE EVALUATION OF TIM'S NETCO

And now the hottest topic at the moment: that of asset enhancement.

"In terms of valuation, Intermonte assigns the single network a value of approximately 25 billion, estimating the Enterprise value of NetCo 16.7 billion (FiberCop 8.2, primary network 7 and Sparkle 1.5 billion) and that of Open Fiber 8, 6 billion while Equita has a NetCo valuation of approximately 21 billion (5 billion of Equity value). Bestinver values ​​NetCo 16.6 billion and ServCo 15.1 billion (9.1 billion EnterpriseCo, 6.1 ConsumerCo) ”reports Il Sole 24 Ore .

Evaluations, the latter, which remain uncertain, stresses the Confindustria newspaper, since the perimeter of the Tim Network is not clear, which could also include the backbone in addition to the access network and Sparkle, as already mentioned.

For Il Messaggero , on the other hand, "The draft of the project shows that the equity value of Fibercop (secondary network) could amount to 4.7 billion with an enterprise value of 7.7 billion, while the primary network belonging to Tim, would have a valuation between 4 and 8 billion ".

CONSIDERATIONS ON VIVENDI'S OPEN FIBER

But Vivendi's number one raises Open Fiber's valuation when the Macquarie fund acquired its stake in Open Fiber.

“Open Fiber's valuation was $ 5.3 billion for equity plus $ 2 billion in debt. So 7.3 billion of enterprise value. A multiple, De Puytontaine recalled by 29 times. And the evaluation of 10 times the EBITDA for Netco does not hold up in this way ”reports Il Sole 24 Ore .

“Yesterday various analysts warned against the comparison tout court between the two multiples. Intermonte writes that «taking as reference Open Fiber's 2025 ebitda target of around 780 million, discounting it at a rate of 6%, this would imply a multiple of 11x paid by Macquarie and Cdp to take over the shares from Of». To this multiple "Netco would be worth around 24-25 billion" "adds the Confindustria newspaper.

TOWARDS THE IRON ARM BETWEEN CDP AND VIVENDI?

But what do you think of Cdp?

Starting from the valuation of the TIM network at 20 billion (with the 12 billion debt attached), Cdp together with the Kkr and Macquarie funds should pay out another 6 billion to finalize the purchase. “A not indifferent figure, even if not impossible”, comments Repubblica .

“But Cdp, being also a shareholder of Tim, could re-propose the split which automatically assigns a value to the two separate companies through the stock exchange. The outlay for CDP and funds would be lower and the match would remain in the hands of Tim (and Vivendi) who would find about 8 billion in debt and 2 billion in EBITDA in the ServCo, a relationship that is difficult to sustain ”continues Repubblica .

However, “Vivendi with its 24% stake in Tim can exercise a block that would be automatic in the event of an extraordinary meeting (necessary if the splitting route was chosen) which requires the yes of two thirds of those present. On the other hand, with the sale of the asset, an extraordinary assembly would not be necessary ”, reports Il Sole 24 Ore .

Sector analysts at Startmag comment: "It is improper to refer to the same valuation parameters for the two networks because Open Fiber's is technologically superior to that of Tim di rame even if obviously Tim's shareholder Vivendi has an interest in winning a value as high as possible for that of Tim while Cdp has to balance the needs because it has a system role as well as being a shareholder of Open Fiber.

TIMING

Finally, more will be known about the project on 7 July, the date of presentation of Tim's new business plan, when Labriola will have defined the reorganization with the separation of the group into two.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/come-sara-e-quanto-varra-la-societa-per-rete-unica-tim-open-fiber/ on Mon, 06 Jun 2022 05:30:54 +0000.