KKR & Co. has reached a preliminary agreement with the Italian government as part of its €23 billion ($25.3 billion) bid for Telecom Italia SpA's network. This move comes amid Rome's efforts to retain a level of oversight over the strategic asset. The agreement allows Italy's Treasury to have up to a 20% stake in the former phone monopoly's network business.
The Italian Economy Ministry stated that the terms of the offer include the government playing a significant role in determining strategic decisions. This involvement is in line with Prime Minister Giorgia Meloni's stance on Telecom Italia's network being a strategic asset that requires public oversight. As the government holds the power to veto deals involving such assets, any offer without state support would face significant challenges, especially considering the government's desire to protect the company's 40,000 employees.
Telecom Italia initiated exclusive talks with KKR in June for the sale of its network in an effort to reduce its debt. The US private equity firm values the network, or grid, at approximately €23 billion, including potential earnout payments based on performance. However, Telecom Italia's largest shareholder, Vivendi SE, has consistently valued the grid at around €30 billion and could potentially disrupt the network sale process by calling an extraordinary shareholders meeting.
Telecom Italia, as a former monopoly, faces the challenge of high labor costs and the need for substantial investments to modernize its network infrastructure. The separation of the network has been a topic of discussion in the Italian industry and politics for over a decade, with various details and potential deals constantly evolving. While the agreement between KKR and the Italian government is a noteworthy development, a definitive agreement is not yet guaranteed.