In economic terms, Italy has become the stage for a proxy war, corollary to the bigger geopolitical confrontation underway between the United States and China, as the two powers have been seeking to invest in strategic Italian assets.
For months, COPASIR (the parliamentary security committee) been stressing the security risks related to Chinese presence in such assets – chiefly, the 5G and broadband network, and the port of Taranto, a well-positioned naval hub in the South of Italy that also hosts NATO and EU operations.
Of course, COPASIR’s duty is to assess the scenarios and suggest a line. Now, the Italian government has carried out a series of interventions that denote its willingness to intervene in the private sector when it deems it necessary. However, these measures do not necessarily align with COPASIR’s concerns, and the executive’s line on those has been inconsistent to say the least.
For instance, some politicians have been sounding the alarm on the Chinese takeover of Taranto for months. Recently, these calls have been further substantiated by another COPASIR report. As of now, the government has not taken steps to address the issue.
And yet, in an exceptional instance of State interventionism, the deal between major Italian telecoms company TIM and American private equity fund KKR was delayed by Rome in early August even as the board meeting at TIM was underway. The deal would have entailed the selling of a minority part of TIM’s ageing secondary network to KKR, which would have reconverted it to fibre.
The government, led by prime minister Giuseppe Conte, assured that it did not want to block the deal altogether, but rather extend the deadline (by a month) to open up the table for a discussion that would involve more parties in the joint creation of a unitary high-speed broadband network, which in turn is envisioned as a tool to reduce the digital divide and boost the economy.
The “third parties” invoked by Rome are incarnated by Open Fiber, partly controlled by the State itself via the State lender, CDP. In its vision for the future single broadband, the government would very much like to have a significant weight in the decision-making processes.
To nobody’s surprise, Washington has expressed its dissatisfaction with Rome’s unwarranted intervention. According to La Stampa, the head of KKR Henry Kravis has approached the American ambassador to Italy Lewis Eisemberg (who had worked for KKR) with a damning question: why is it that the executive is considering using its “golden power” to prevent the deal from happening, effectively turning its back on an Atlantic ally, when that same executive is allowing Huawei in the 5G network?
A bit of background is in order. The “golden power” is the State’s lawful intervention in the private sphere for the sake of national interest. Despite having it extended to include 5G matters and despite the security risks highlighted by COPASIR, the government is not barring Chinese companies Huawei and ZTE from participating in the 5G networks.
To simplify, the government acted to contain the threat from Chinese tech in its network – in compliance with COPASIR’s recommendations – but fell short of excluding it altogether. One has to wonder, then, why is it that the same government intervened so harshly in the TIM-KKR deal.
Tellingly, the founder of the senior governing party, the Five Star Movement, called for TIM (a private company) to split its infrastructures and services divisions, and merge the first with Open Fiber, which is partly owned by the State.
The reason for doing this, argued Beppe Grillo in his personal blog, is that going ahead with the original TIM-KKR deal would have created a “hodgepodge” of conflicting interests and unwanted foreign influence in strategic sectors.
Trouble is, this concern for foreign influence was nowhere to be seen in Mr Grillo’s stance towards Chinese investments. In past articles, for instance, he had dismissed the concern about allowing Chinese tech companies Huawei and ZTE in Italy’s 5G network as “bad-faith” and “ill-intentioned”.
Also, State lender CDP’s network-devoted offspring (CDP reti) is participated at 35% by the Chinese State Grid Corporation.
Mr Grillo does not hold an official position within the government, but his political clout is influential among Five Star MPs. Tellingly, the Five Star minister for economic development Stefano Patuanelli and his deputy Stefano Buffagni have pushed for Mr Grillo’s line.
Still, the Five Star’s minority partners, the Democratic Party, seems to be acting as a counterbalance. The Dem Roberto Gualtieri, minister of the economy, recently sought to reassure KKR that the government “values as positive” its investment in TIM – in practice, it supports it.
The minister then expressed the commitment to work towards a unitary network, regardless of TIM’s weigh in the future joint venture, because it would have to guarantee “the absolute autonomy of its management[…] the ‘open’ nature of the network, the equal treatment for all operators and the timely realization of plans.”
Mr Gualtieri also called on his governing partners to “free themselves of principled positions and concentrate on what we can concretely achieve in bettering the sub-optimal infrastructure, which is greatly needed by the country.”. The TIM_KKR deal is due for discussion at the end of August.
