TIM (Telecom Italia), KKR Infrastructure, and Fastweb, today announced the closing of FiberCop, a new joint venture to bring fiber optic connectivity throughout Italy.

TIM (Telecom Italia) – Fixed Broadband

In Italy, TIM is the incumbent operator and one of the two largest providers of fiber infrastructure (the other being Open Fiber). TIM passes 20 million homes with fiber-to-the-cabinet (FTTC) and fiber-to-the-home (FTTH) technology and has 7.6 million fixed broadband customers.

FiberCop – TIM Carve-Out and Formation

TIM is contributing a portion of its fixed broadband infrastructure into the FiberCop joint venture, which includes its:

  1. Secondary Network: both copper and fiber infrastructure that goes from roadside cabinets to customers’ homes. Indeed, ducts and sockets are included in this passive infrastructure, but the cabinets are excluded
  2. Fiber Network Developed by FlashFiber: TIM-Fastweb joint-venture, which passes ~4 million homes
FiberCop Transaction Perimeter

Through this network, FiberCop currently offers fixed broadband (i.e., not only fiber) services to 90% of the population of Italy.

Fiber-to-the-Home Roll-Out Plan

FiberCop will provide fiber-to-the-home (FTTH) coverage for TIM customers and targets offering connection speeds of 1 gigabit per second.

FiberCop Roll-Out and Coverage Plans

Currently, FiberCop has 20% fiber-to-the-home (FTTH) coverage, which is equivalent to 5 million homes passed. In the medium-term, by 2023, the group targets a fiber roll-out reaching 42% coverage. Finally, by 2025, the company has set a target to cover 56% of homes in Italy, equivalent to 16.5m fiber-to-the-home (FTTH) passings.

Overall, by 2025, FiberCop intends for its fiber roll-out to provide connectivity to 1.6k municipalities in Italy. In turn, based on European Union Guidelines, the company will cover 100% of black areas, 76% of black & grey areas, and 56% of white areas. Definitionally, black areas constitute areas in which 2+ ultrabroadband (UBB) networks of different operators are present, gray areas have 1 other ultrabroadband (UBB) network, and white areas have none.

Finally, TIM will construct and maintain the FiberCop network.

Open Access Wholesale Fiber Network

FiberCop will roll-out fiber on the basis of it being an open access wholesale fiber network. Therefore, in addition to TIM leasing the network, it will also available to any third-party telecom operators in Italy, to use on a wholesale basis.

FiberCop – Ownership and Valuation

FiberCop has an initial Enterprise Value of €7.7bn and €3.0bn of debt allocated to the entity. Indeed, this implies the equity value of FiberCop is €4.7bn. Therefore, KKR Infrastructure’s purchase of a 37.5% stake in FiberCop results in a €1.8bn cash payment to TIM.

FiberCop Transaction Structure

Beyond KKR, the remaining equity interests in FiberCop will be held by TIM, with a 58% stake, and Fastweb with a 4.5% ownership interest. Notably, Fastweb is exchanging its 20% stake in FlashFiber, its joint venture with TIM, for its 4.5% stake in FiberCop. Finally, because TIM continues to hold a 58% stake in the business, it will remain consolidated for TIM financially.

TIM forecasts that FiberCop will have revenue of €1.2bn to €1.3bn and EBITDA of €0.9bn in 2021. Therefore, based on the company’s Enterprise Value of €7.7bn, its valuation equates to 8.6x EBITDA.

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