KKR’s €22bn acquisition of Telecom Italia’s landline network, Fiber Cop, is facing significant challenges two years after the deal closed. Line connections are well below target, leverage remains high, and relations with its primary customer, Telecom Italia (TIM), are increasingly strained. The US private equity group must rapidly turn around the business to meet its goal of floating Fiber Cop by the end of the decade, while also resisting pressure from Rome to merge with state-controlled rival Open Fiber.
The investment case relied on managing the decline of the copper network while expanding fibre connections and cutting costs. However, losses on the legacy network have far exceeded forecasts, with Fiber Cop losing about 800,000 active lines over the past year, reducing its customer base by over 5%. KKR’s initial projections anticipated more than 15 million active lines by the start of this year, but Fiber Cop was still 1.6 million below that target at the end of June, equating to roughly €230 million in annual revenue.
Despite this, KKR insists the deal remains on track, claiming Fiber Cop is performing in line with the original investment case. The company highlights a 26% rise in active domestic fibre connections, largely driven by Fiber Cop, and says it has locked in €198 million of cost savings through job cuts, new IT systems, and more efficient equipment. However, to hit its €1.9 billion earnings target for the year, the company needs a sharp profit increase in the second half after reporting only €800 million in the first, a pace described as 'increasingly ambitious' by analysts.
Source: Financial Times Companies · Summarized by HeadlinesBriefing