Telecom Italia (TIM), 24% owned by Vivendi, is once again the object of foreign envy. And if Vincent Bolloré's investment had sparked a reaction of “hostile protectionism” on the part of the Italian government, the interest shown by KKR provoked “active vigilance”. The US investment fund is not the activist “vulture” fund Elliott which abruptly increased its stake in TIM in 2018.

The title of the transalpine telecoms operator jumped 30% on the Milan Stock Exchange, for a market capitalization of 9.6 billion euros (against 10.8 billion offered by KKR), following the announcement of the offer from the American. An optimism was shared by the government of Mario Draghi which immediately published a note welcoming “the interest shown by qualified investors to invest in important Italian companies.

This is good news for the country. If this were to materialize, it will first and foremost be the market that will assess the soundness of the project. But the government will follow up with its developments and will carefully assess the exercise of its prerogatives.

Those of “Golden Power” allowing to block foreign takeover bids to protect companies deemed to be of strategic importance. Special powers that have only been used four times since 2012, including twice by Mario Draghi – in office for only nine months.

He has already set up a ” super committee ” to follow the file bringing together the ministers of the Economy, Economic Development, Digital Transition as well as his economic advisor and the Under-Secretary for the Secret Services to the Presidency of the Council.

The State Arbitrates In The Project Of A Single Network:-

The Covid-19 pandemic has made everyone aware of the eminently strategic nature of the telecommunications sector. “The state cannot simply submit to the logic of the market,” warns Maurizio Landini, secretary of CGIL, the main Italian union. A strategic plan is needed for the creation of a single fiber-optic network. If the KKR project should have a negative impact on the industrial interest of the country or on the 40,000 employees of TIM, Mario Draghi will have to resort to ‘Golden Power'.

His government reiterates for the moment its desire to” ensure that KKR's projects are compatible with the rapid completion of the deployment of fiber provided for by the recovery plan with the necessary investments.

The previous executive headed by Giuseppe Conte tried to relaunch last year the project to merge TIM's fiber-optic network (FiberCop, owned with Fastweb, one of its competitors) with that of Enel (Open Fiber). The State would play the role of monopolistic actor via the public investor Cassa Depositi e Prestiti which holds a stake of 9.8% in TIM and 60% in Open Fiber.

The divisions within the government had dragged the file. Today, the government is more united and KKR is perceived as a long-term investor, even if Vivendi for its part is not opposed to this unique network either.

That said, Agcom (the supervisory and regulatory authority for telecommunications in Italy) and the European Commission, in the person of Margrethe Vestager, Commissioner for Competition, have not hidden their reservations on a project that is stuck for several years.

KKR's Offer Reassures Brussels:-

“KKR's offer originates in Brussels,” says Carlo Alberto Carnevale-Maffè, professor of strategy at Bocconi University in Milan. The plan for a single network is basically good for Italy to catch up with its neighbors. But it was badly put together. KKR is already a partner through its participation in FiberCop. He knows the file and has made a very serious cash offer.

The Minister of Digital Transition masters the subject as a former boss of Vodafone. Vivendi was caught off guard, but he's rational. Bolloré has no support in Rome and cannot count on the support of the French state. He adopts a critical attitude but does not close the door to negotiation by not setting up a counter-offer.