Telecom Italia Earnings: Sells Fixed Network for EUR 18.8 Billion, Deleverages Balance Sheet

No-moat Telecom Italia, or TIM, provided more details on the agreement to sell its fixed network (Netco) to KKR for an enterprise value of EUR 18.8 billion. The decision was approved by the board of directors on Nov. 5. The enterprise value could rise to EUR 22 billion if a partial or total merger with Open Fiber’s network is reached. A merger with Open Fiber into a single wholesale-only network would be very positive as it would avoid network duplicities. This transaction will leave TIM as a service provider in KKR’s network and allows TIM to significantly deleverage its balance sheet, from EUR 20.6 billion in net debt today to EUR 6.4 billion. In relative terms, net debt/EBITDA will go down from 4 to 2 times, closer to the average of European telecommunication companies. The transaction is expected to close in the summer of 2024. We are maintaining our EUR 0.25 fair value estimate.