By Elvira Pollina and Stephen Jewkes
MILAN (Reuters) - Telecom Italia (MI:TLIT) (TIM) expects to make decisive progress this year on plans to provide Italy with ultra-fast broadband, but it will never accept a minority stake in any unified network created by a tie-up with smaller rival Open Fiber.
The Italian government sees building ultra-fast broadband as a priority and last month, as the country battled one of the world's worst coronavirus outbreaks, called on TIM and Open Fiber to reach an accord quickly.
A nationwide lockdown enforced by Rome in an effort to stem contagion has highlighted the need to accelerate the completion of the network as millions of Italian can't leave their homes and embrace smart-working.
TIM has been in talks for months over a merger with Open Fiber, controlled by utility Enel (MI:ENEI) and state lender Cassa Depositi e Prestiti (CDP).
It is also in exclusive talks with U.S. infrastructure fund KKR to invest in its own secondary last-mile network.
CEO Luigi Gubitosi said TIM would hold separate discussions with KKR and Open Fiber, leaving the door open to a "possible convergence" at the end of the process.
TIM, whose shareholders include French media giant Vivendi (PA:VIV), is looking to gradually switch its last-mile network to fiber.
Talks with Open Fiber have proved fruitless so far with Enel reluctant to part with it and questions over regulation and funding complicating matters.
"It's time for Enel to make up its mind," Gubitosi said.
"This year something must happen," he added, while ruling out giving up control of any merged network, with the possible exception of lines laid in areas where it was not economically viable.
"This is our core business and TIM is the best company to do the job," Gubitosi said.
TIM, which is partly owned by CDP, said FiberCop, which owns TIM's fiber and copper last-mile network, was worth 7.5 billion euros, including debt. It said the sale of a 40% stake to KKR would allow it to cash in around 1.8 billion euros.
Gubitosi said it was reasonable to expect an accord with KKR could be reached by the summer.
He said it was early to gauge the impact of the coronavirus outbreak on TIM's business, which has seen a spike in traffic but longer term could be affected by the economic recession which the outbreak is likely to have triggered.
"Fixed-line traffic ... has been up 70% in the last week or ten days, mostly in the north," he said.
Gubitosi said TIM's fixed-line backbone could sustain the increase and it still had "ample reserves".
Shares in TIM closed up 4% on Wednesday after the group reported healthy cash generation last year and surprised analysts with a forecast for an equity free cash flow of 4.5-5 billion euros under a new plan through 2022.
Investors also welcomed news that Telefonica (MC:TEF) and TIM were planning a joint offer to buy the mobile unit of bankrupt Brazilian carrier Oi SA.
TIM said the deal would not impact debt reduction plans at the group, with synergies generated from the first year.