Having carved its way into the competitive Italian telecoms market just seven years ago, Iliad is once again exploring a significant merger with Telecom Italia, Italy’s dominant telecoms operator. Reports suggest the French telecoms group has informed the Italian government of its intentions, given the government’s 10% stake in TIM and “golden powers” which allow for vetoing foreign takeovers involving critical infrastructure.
The proposed deal is expected to be a merger rather than breaking up TIM’s business units. Italy’s telecom market, saturated with four major players—Vodafone, TIM, Iliad, and WindTre—has been ripe for consolidation. The entry of Iliad in 2018 triggered a fierce price war, reducing profit margins drastically.
Previously, Iliad had sought to merge with Vodafone Italia. Nonetheless, the latter was instead merged with local broadband player Fastweb by Swisscom for €8 billion. This reflects ongoing complexities in market consolidation efforts.
Despite a broad understanding of the need for market consolidation, a merger between TIM and Iliad is no straightforward affair. Combined, they would hold about 41% of the mobile market and 40% of the fixed broadband market share. This likely dominance would not go unnoticed by regulators concerned with market competition and consumer welfare. Critical regulatory scrutiny can be anticipated, adding complexity to the path forward for both telecommunications giants.
Intriguingly, separate from Iliad’s maneuver, CVC Capital Partners is also expressing interest in TIM. They have informed the Italian government of their interest in acquiring the 24% stake currently held by French investment company Vivendi. CVC’s longstanding interest dates back to 2022 when the firm made a non-binding offer for a minority stake in TIM’s enterprise unit.
Vivendi, critic of last year’s sale of TIM’s fixed network infrastructure to KKR, argues the assets were undervalued. Attempts to reverse the sale through legal channels, however, have borne no results yet, adding layers of intrigue and challenge to potential investment deals.