Telecom Italia (TIM) has given the green light to the €19 billion sale of its fixed-line network to US private equity firm KKR.
The move is particularly notable as TIM becomes the first major telecoms group in a European country to part ways with its landline grid.
Italy views this asset as nationally strategic. The country has been working diligently to bridge its digital divide with the rest of the European Union, making the sale a crucial step in its digital transformation journey.
TIM CEO Pietro Labriola’s strategic vision has been instrumental in this decision. The sale is part of Labriola’s plan to revitalise the debt-laden former phone monopoly, which has been grappling with the challenges of maintaining its ageing grid. The approval came after an extensive review of KKR’s offer by the board, with 11 directors in favour and three against.
The deal, valued at €18.8 billion including debt, could potentially reach €22 billion under certain conditions specified by TIM. Most notably, the earnout is contingent on the amalgamation of TIM’s grid with that of state-backed fibre optic rival Open Fiber, paving the way for a unified telecoms network.
This strategic move not only allows TIM to reduce its financial debt substantially, by around €14 billion, but also facilitates a significant restructuring within the company. TIM plans to streamline its operations by shedding half of its 40,000 domestic staff and refocusing on its core service offerings.
Italy’s government has authorised the Treasury to spend up to €2.2 billion to acquire a 20 percent stake in the network alongside KKR. This partnership aims to safeguard Italy’s digital infrastructure while fostering growth and innovation in the telecom sector.
However, leading shareholder Vivendi – which owns 24 percent of TIM – has expressed dissent regarding the board’s decision.
Vivendi has contested the legality of the decision, seeking a higher price for the sale and raising concerns about the sustainability of the business left behind. Despite Vivendi’s objections, TIM has chosen not to subject the decision to a shareholder vote.
The sale, slated to conclude in the summer of 2024, marks a significant turning point for TIM and the Italian telecom industry—shaping the landscape for future innovations and investments.