Telecom Italia's Fixed Line Saga: KKR Takes the Reins amid Controversy
Telecom Italia, struggling under a mountain of debt, has sold its fixed-line network to KKR, a US financial investor, despite resistance from major shareholder Vivendi. The board of directors agreed to KKR's offer, worth €18.8 billion, which could rise to €22 billion under certain conditions. The Italian government, also a stakeholder, will acquire a minority share.
This sale makes Telecom Italia one of the first major European ex-monopolists to offload its fixed-line business, focusing on its service operations. CEO Pietro Labriola aims to use proceeds to restructure the company and tackle the staggering €26 billion debt. The deal is expected to close in the summer of the following year, with the right-wing conservative government of Prime Minister Giorgia Meloni in support.
The strategic importance of Telecom Italia's fixed-line network to Italy, serving most households, companies, and state institutions, prompted the government to retain a 20% stake, paying up to €2.2 billion. Vivendi, holding 24% of Telecom Italia, criticized the KKR offer as too low and doubted the viability of the remaining business. Despite Vivendi's call for a shareholder vote, their proposal was ignored. Vivendi announced legal action against the Board's decision and smaller shareholders advocated for an alternative restructuring plan.
KKR's acquisition of Telecom Italia's fixed-line network gains the backing of Italy's conservative government due to the network's national significance. Following the sale, the Italian state will hold a 20% stake in Telecom Italia.
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The sale to KKR commenced on July 1, 2024, as part of a debt reduction strategy, valuing the network at €18.8 billion with possible earn-outs linking to a NetCo-Open Fiber merge. The deal reduced TIM's debt from €27 billion to €8.1 billion, with further reductions anticipated by 2024.
Regulatory bodies have engaged with CVC Capital Partners to address antitrust concerns, while Vivendi, who lobbied against the sale, launched legal challenges. However, their appeals were dismissed by the Court of Milan in January 2025 for technical reasons related to standing. Vivendi has vowed to continue its legal battle, claiming that shareholder approval should have been sought due to the sale's impact on TIM's corporate purpose.
The acquisition and subsequent legal battles impacted TIM's stock performance, with Vivendi shares experiencing a 5% rise following reports of CVC's interest in buying Vivendi's stake in TIM. The Italian government's intervention and CVC's scrutiny may influence future deals related to TIM.
