CPP Investments joins Italy's NetCo Digital Venture

Canada Pension Plan Investment Board (CPP Investments) is set to expand its portfolio in Italy's digital infrastructure, having agreed to secure a 17.5 percent stake in NetCo for up to $2.9 bn.

This move is part of a larger transaction that places NetCo's enterprise value at approximately $27.5 bn. NetCo, emerging from Telecom Italia S.p.A, represents Italy's most extensive telecom network and is currently being acquired by the Optics BidCo investor group.

This group is spearheaded by Kohlberg Kravis Roberts & Co. L.P. (KKR) and includes notable members such as a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA), the Italian infrastructure fund F2i, and the Ministry of Economy and Finance of the Italian Government.

NetCo's operational focus will be on its fixed network assets, which are in the process of being spun off from Telecom Italia. It aims to offer nationwide connectivity to both residential and commercial spaces through an open-access wholesale model, utilizing a blend of copper and fiber technologies. 

James Bryce, managing director and global head of infrastructure at CPP Investments, highlighted the strategic importance of NetCo, stating, “NetCo will provide critical end-to-end data connectivity services that support the functioning of the Italian economy.”

He expressed confidence in the investment's alignment with long-term, quality digital infrastructure development across Italy, while also anticipating beneficial, long-term, risk-adjusted returns for the fund. Bryce also sees potential for further infrastructure investments in Italy by CPP Investments.

The investment strategy for NetCo includes pushing forward a comprehensive network upgrade, enhancing service quality and capacity with fiber-based solutions, phasing out outdated copper technologies, and improving IT systems and operational efficiencies.

This transaction is slated for closure in the summer of 2024, pending the fulfillment of customary conditions.