Italys TIM, CDP eye preliminary deal on single network, sources say

  div classBodysc17zpet90 cdBBJodivp Fixes reference to Macquarie and KKR in paragraph 9p

  pMILAN Reuters Telecom Italia TIM is eyeing a preliminary agreement with state lender CDP over a longheld plan to merge TIMs network assets with those of statebacked rival Open Fiber as early as next week, two sources said on Friday.pdivdivdiv classBodysc17zpet90 cdBBJodiv

  pUnder pressure for years in its hypercompetitive domestic market, debtladen TIM last month started formal talks with CDP to revive a plan to create a single broadband network champion.p

  pNegotiations came at a time when TIM CEO Pietro Labriola, who took the helm of the company in January, is working on a proposal to break up TIMs operations in a bid to unlock value and pursue M&ampA deals.p

  pUnder such a plan, Labriola said the former phone monopoly was open to relinquishing control of its network infrastructure, seen as a way to ease a merger deal with Open Fiber.p

  pAs part of the overhaul, most of TIM‘s network assets would be carved out into a separate unit, called NetCo, which would take up a significant portion of the company’s debt and domestic staff.p

  pThe sources said TIM and CDP are finalising a draft of a framework agreement which could be discussed at a Telecom Italia board meeting scheduled for May 26, cautioning the nonbinding agreement could still be delayed.p

  pItaly is keen to create a single network champion to avoid duplicating investments and speed up fibre optic roll across the country.p

  pTreasurycontrolled CDP, which is TIM second largest investor with a 10 stake and holds a 60 stake in Open Fiber, aims to get full control of the combined network entity, sources have previously said. p

  pInfrastructure funds Macquarie and KKR, which hold minority stakes in Open Fiber and TIMs grid respectively, have also been involved in discussions as their support would be key for any plan to go through.p

  pKKR, which spent 1.8 billion euro to buy a 37.5 stake in Telecom Italias last mile network unit FiberCop and attempted a failed takeover approach for the whole of TIM, has expressed concerns over potential future regulatory and valuation issues related to the single network plan.p

  pBut a source familiar with the matter said the fund would not oppose the framework agreement.p

  p Reporting by Elvira PollinaEditing by Keith Weirp

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