MILAN (Reuters) – The Italian government could obtain a stake of up to 20% in the fixed network of the former telephone monopoly Telecom Italia (TIM) after signing a memorandum of understanding with the American fund KKR, which is preparing a purchase offer for TIM.
KKR is in exclusive discussions with TIM, a heavily indebted group, about the acquisition of NetCo, which combines TIM’s fixed line network and its submarine cable subsidiary, Sparkle.
A statement from the Italian Treasury says a memorandum of understanding, signed on Thursday evening, paves the way for the Treasury to secure a stake of up to 20% in TIM. The government will play a key role in strategic decisions relating to the TIM network.
According to a source familiar with the matter, the Italian infrastructure fund, F2I, is also ready to invest in NetCo, which would create a combined stake allowing the Italians to have around 30%.
TIM’s network is Italy’s main telecommunications infrastructure and the government has been seeking for years to ensure that investment is made to upgrade it by upgrading to fiber optics.
Paralyzed by a debt of 26 billion euros and in lack of liquidity, TIM had considered parting with its main asset to reduce its debt as well as its workforce. This approach would be a first in Europe among the former telephony monopolies.
KKR has until the end of September to make a binding offer after starting talks with TIM in June. A stumbling block to any deal would be the position of media group Vivendi, which has a roughly 24% stake in TIM.
KKR, the New York-based investment firm, made an offer of some 23 billion euros, taking into account the debt situation and a number of variable elements, people familiar with the matter said.
The actual valuation of equity is around 10 billion euros.
(Report Valentina Za, Giuseppe Fonte and Elvira Pollina, written by Keith Weir; French version Lina Golovnya, edited by Kate Entringer)
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