EU gives KKR green light to acquire fixed ops of TIM Brasil’s parent for US$24bn

US fund KKR received the green light from the European Commission to acquire the fixed line operation (NetCo) of TIM Brasil’s parent Telecom Italia in a deal worth around US$24bn that could ultimately shape the long-term fate of operations in Brazil.

The divestment is part of a broader push by the Italian group to reduce its debt and provide financial relief. Telecom Italia's French shareholder Vivendi tried to prevent the transaction, but without success.

The European Commission, acting as the EU antitrust regulator, assessed the potential impact of the deal and concluded that it would not significantly reduce the level of competition in the market for wholesale broadband access services in Italy.

“In particular, the Commission found that: (i) KKR would not have the ability to restrict access to passive services (i.e., infrastructure)" and that "the transaction would not increase the likelihood of coordination between NetCo and OpenFiber, given that Fastweb will continue to exert competitive pressure on NetCo and its long-standing competitor, Open Fiber,” it said in a statement.

Open Fiber is an Italian wholesale telecoms company, owned 60% by CDP Equity and 40% by Macquarie Asset Management. Italian telco FastWeb provides fixed and mobile telephony, broadband internet and IPTV services in the country.

In addition to Telecom Italia's fixed network, KKR had also presented a non-binding proposal for Sparkle, the submarine cable unit of Telecom Italia which is also for sale, but negotiations did not progress.

The fixed business deal marks KKR's entry into Telecom Italia's footprint and could have an impact on the telco's strategy for its business in Brazil, although both the boards of TIM Brasil and Telecom Italia rule out any sale or change of plans for the Brazilian operation.

KKR has made heavy investments in the Latin American telecom sector in recent years, particularly in the fixed segment, with KKR's purchase of control of Telefónica's fiber networks in Peru, Colombia and Chile to create wholesale fiber vehicles.

In January this year, KKR also entered into a deal to acquire 1,100 wireless towers from Millicom’s subsidiary Tigo Colombia.