The European Commission is investigating the accuracy of the information provided by the investment fund concerning the impact its acquisition would have on the market
The European Commission yesterday announced an investigation into the information provided by the investment fund KKR about the impact of it acquiring TIM’s fixed network last year. It was the biggest private equity deal ever in Europe. It seems the main area of interest is the effect on wholesale broadband access in Italy.
Update: KKR said in a press statement, “As stewards of public infrastructure, we take seriously our responsibility to those we serve, the European Commission, and Italian regulators.
“As part of the transaction clearance, we worked with the European Commission in good faith and provided specific and accurate information, and FiberCop continues to adhere to customer commitments and economic regulation governed by AGCOM, the independent Italian communications regulatory authority. KKR will fully engage with the Commission to address any concerns and work toward a full resolution of this matter.”
Deal was approved
The Commission approved the deal unconditionally on 30 May last year after examining information submitted by interested parties to guard against any party gaining dominant and possibly monopolistic power in the market. It is a legal requirement that information submitted to the Commission when seeking approval is complete and accurate, without misrepresentation.
The Commission decided that the deal would not be to the detriment of retail broadband and other service suppliers.
The complex acquisition was pushed through after a battle of more than a year and after many years of turbulence in TIM’s boardroom. The French media group, which was then TIM’s major shareholder, fought the takeover of the fixed network, and its being spun out of the rest of the organisation. KKR bought NetCo in 2024: NetCo was set up in November 2023.
NetCo controls the fixed-line wholesale business, FiberCop which was itself was spun out of TIM in August 2020 with TIM holding 58%, KKR Infrastructure 37.5% and Fastweb 4.5% at its creation.
TIM’s CEO, Pietro Labriola, argued that the acquisition by KKR was the best option for rescuing the debt-laden former state-owned monopoly and had the backing of the Italian government.
Financial projections at odds with reality?
It appears that some of KRR’s financial projections might not be going to plan. In January FiberCop’s CEO, Luigi Ferraris, quit after seven months in the job over “a projected €449mn earnings hole”.
Reportedly at a meeting of shareholders in February, FiberCop’s management said the predicted shortfall in earnings compared to those set out in KKR’s business plan meant that either the projected billions of euros in dividend payments over the next five years would have to be cut or the company would have to raise more public debt and risk a ratings downgrade. The main reason for the immediate shortfall was due to the number of lines it expected customers to cancel, which has since been revised upwards.
It is also reported that the management said it expected a €2 billion EBIDTA shortfall over the next five years compared with KKR’s business plan. This did not go down well with shareholders. The FT’s report suggested that in future, KKR would have to approve all public statements.
Fibercop has refuted reports of tensions among shareholders.
