• After almost two years of deliberations, a preliminary deal has been reached to merge the assets of Italy's two major FTTH network builders
• FiberCop, the fixed access unit of TIM (Telcom Italia), will merge with Open Fiber
• The move will create a single national wholesale fibre network that any ISP can use to reach their customers

After a number of false starts and setbacks, Italy is now on course to have a single national wholesale fibre network following a preliminary agreement between the two current major builders of FTTH networks, TIM (Telecom Italia) and Open Fiber, and the handful of companies with an economic interest in their operations.

The idea that TIM’s fixed access unit, FiberCop, should merge with wholesale fibre access operator Open Fiber to create a single national entity called AccessCo first emerged in 2020 when a 37.5% slice of FiberCop was sold to private equity firm Kohlberg Kravis Roberts (KKR), with TIM retaining a 58% stake and Fastweb holding a 4.5% slice. At that point, TIM wanted to ensure that it would hold a majority 50.1% stake in the merged entity. (See TIM buys into national Italian broadband plan.)

But a lot happened between then and now, including an unsuccessful bid by KKR to acquire the whole of TIM for €10.8 billion, a change in national political leadership (a new coalition government under Mario Draghi came to power in February last year) and a change of leadership at TIM, with Pietro Labriola installed as the new CEO earlier this year. His new ‘industrial strategy’ includes splitting the company into two separate entities (a ServCo and a NetCo) and pursuing the merger of FiberCop with Open Fiber with the understanding that TIM would not be able to maintain a controlling interest in the merged entity.

Now, it seems, all parties are aligned on the way forward, as the signatories to the “non-binding Memorandum of Understanding (MoU) for the integration project” include not only the two operators but also KKR, Macquarie Asset Management (which now owns 40% of Open Fiber) and CDP, the Italian state-owned investment bank that owns 60% of Open Fiber and about 10% of TIM.

Under the MoU agreement, CDP Equity would control AccessCo, the creation of which, it is hoped, will “accelerate the diffusion of fibre optic and VHCN (Very High Capacity Networks) infrastructures throughout the country to enable access to the most innovative and efficient services offered by the market to the general population, public bodies and businesses, thereby contributing to a faster, more durable and sustainable development of the Country.” The various parties have agreed to “negotiate exclusively” with the aim of signing a binding agreement by 31 October.

If all goes to plan, the assets of FiberCop and Open Fiber will be merged and made available to any company wishing to offer retail fixed broadband access services, including TIM of course. The idea is that by not having competing infrastructure builders, the process of reaching all possible Italian premises with a fibre connection will be completed quicker and more efficiently.

Currently, FiberCop is the more developed of the two operations, which is understandable as it has TIM’s legacy fixed network as part of its portfolio: Its current network provides ‘ultra-broadband’ fixed connectivity to more than 94% of fixed lines using legacy fibre-to-the-cabinet (where the final connection is still a copper line) and FTTH technologies and will continue to roll out FTTH coverage enabling a connection speed of over 1 Gbit/s with the aim to reach approximately 60% of households nationwide by 2026 (there are about 26 million households across the country). It generated almost €1 billion in revenues in 2021.

Open Fiber, formed in 2015, has always focused on fibre lines (plus some fixed wireless access connections) and has passed 13.8 million premises with its network: Open Fiber’s revenues totalled €380 million in 2021.

But, of course, there are also many potential pitfalls to such a combination (beyond the fact that it will require the sign-off from regulators in Italy and at the European Commission. Strict rules and independent oversight will be needed to ensure that AccessCo doesn’t abuse its monopoly status and that the multiple parties involved are not constantly at war about the strategic direction of the merged entity. To this end, TIM and Open Fiber have been collaborating recently in what has almost certainly been an exercise in proving that everyone can play nicely.

The best possible outcome is that Italy get a fabulous national fibre network that helps develop its digital economy and that TIM is able to shore up its balance sheet (FiberCop is believed to be worth at least €15 billion, maybe more) and focus mostly on the ServCo part of its business, which comprises its mobile access assets and consumer/enterprise services operations. That may sound quite simple but it’s actually a tall order.

- Ray Le Maistre, Editorial Director, TelecomTV