Italy approved on Monday two decrees providing for the economy ministry to take a stake of up to 20% in Telecom Italia’s (TIM) landline grid.
The scheme implements a Memorandum of Understanding (MoU) signed on Aug. 10 between the Treasury and U.S. fund KKR over a joint takeover of NetCo, a venture comprising both TIM’s domestic fixed-access network and submarine cable unit Sparkle.
“The government took action to defend the national interest and the workers,” Prime Minister Giorgia Meloni said in a statement.
KKR has offered around 23 billion euros ($24.85 billion) for NetCo once debt and a number of variable items are included, while also leaving the door open for the government to join its bid and maintain oversight of the asset.
Economy Minister Giancarlo Giorgetti told reporters the decrees would allow the Treasury to acquire a minority stake in NetCo worth “up to 2.2 billion euros”, partnering with KKR and other domestic players.
“What the government is interested in is reaffirming the public control over certain strategic choices regarding an infrastructure that we deem as strategic,” he said.
Rome will issue sovereign bonds to fund its investment, according to a source familiar with the matter.
However, the acquisition will replace other financial operations that have already been factored into Italy’s latest public finance estimates, so the debt-to-GDP ratio will not be affected, the source added.
Reuters has previously reported that Italian infrastructure fund F2I is also set to invest in NetCo, raising the combined stake in Italian hands to around 30% to 35%.
Giorgetti said state lender Cassa Depositi e Prestiti (CDP) could also invest in the venture.
TIM’s network is Italy’s main telecommunications infrastructure and the government has been looking for years to ensure investments are carried out to upgrade it to fast fibre optics from copper.
Crippled by 26 billion euros in net debt and burning cash, TIM has resorted to hiving off its main asset to shed debt and staff, in a move that would be a first in a major European country among former phone monopolies.
While the decrees provide political blessing for KKR’s approach, the grid sale also requires the backing from TIM’s top investor Vivendi, which has so far demanded a higher valuation to back any deal.
With a near 24% stake, the French media giant’s position might still be a hurdle to its completion.