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Italian Government Supports Telecom Italia’s Proposed Deal with US Fund KKR

Rome: The Italian government has expressed its support for Telecom Italia (TIM) to sell its network grid to US fund KKR, despite the emergence of a rival plan for the telecoms group. A government source stated that “Any other initiative is not part of the government’s intentions,” referring to an alternative strategy proposed by a London-based investment firm representing shareholders owning less than 3% of TIM.

KKR has made a binding offer for TIM’s main network infrastructure, valuing it at approximately 23 billion euros ($24 billion), inclusive of debt and some variable components. The offer is crucial for TIM’s efforts to reduce its significant debt. The TIM board is scheduled to review the offer at meetings on November 3 and November 5.

The government has effectively endorsed KKR’s approach by authorizing the Treasury to acquire a 15-20% stake in TIM’s grid for up to 2.2 billion euros, alongside the US fund. In response to the alternative strategy proposed by the London-based investment firm, the government source highlighted that the government has already made decisions that envision another plan, emphasizing that the KKR offer is the only proposal it is involved in.

TIM has announced that the rival document will be presented to its board at the November 3 meeting, following the verification of share ownership of the firm behind the alternative plan. However, TIM confirmed that it is continuing to review the KKR offer and it will be discussed as scheduled at the upcoming board meetings.

Earlier this month, TIM’s strategy was challenged by Merlyn Advisors and a former TIM senior executive. They proposed an alternative scheme where TIM would retain its entire fixed network business, as well as its cloud and digital services operations, while selling its domestic retail business and its valuable Brazilian unit.

The KKR deal has also faced opposition from TIM’s largest investor, French media group Vivendi.