Italian government approves state piece of the NetCo action

The Italian government has finally approved its own involvement in the protracted takeover of TIM’s fixed line assets.

While the approval itself was largely a formality, given the MoU signed earlier this month, statements accompanying it shed a bit more light on the Italian government’s thinking on the matter. The announcement has only been published in Italian, but Google Translate is fairly trustworthy on European languages.

Giorgia Meloni, the current Italian Prime Minister, has a relatively national populist position and, as such, is concerned about having some control over things she has decided are of ‘strategic interest’. Those include the country’s fixed line network and consequently a law has been passed that allows the finance ministry to acquire 15-20% of NetCo for maximum outlay of €2.2 billion, with the rest going to investment group KKR.

“The direction taken by the government is the one that the centre-right has always hoped for and supported: assuming strategic control of the telecommunications and safeguard jobs,” said Meloni. “Today’s is a first step, which will obviously be followed by market logic, but finally we can say that in Italy there is a government that takes action to defend the national interest and the workers on such an important dossier.”

NetCo represents all of the fixed line interests of TIM (Telecom Italia), including its submarine cable arm – Sparkle. Unstated in the formal announcement, but uncovered by Reuters, is a stipulation that will allow the Italian state to completely acquire Sparkle at some time in the future. This would apparently require it to find another billion euros from somewhere and the option appears to be open-ended.

The end game seems to have commenced in the protracted NetCo saga that began with the creation of NetCo over a year ago. TIM is hardly the most agile company to start with and the active involvement of the state in its affairs has added to its inertia. But ithe Meloni government can claim a win if the spin-off of NetCo happens to the satisfaction of both investors and political interests.

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