Telecom Italia has approved the sale of its fixed-line network to US private equity company KKR (KKR.N) for 19 billion euros ($20 billion), making it the first telecoms group in a major European country to part ways with its landline grid. The agreement, supported by Prime Minister Giorgia Meloni's conservative government, includes an asset that Italy considers to be of national strategic importance as it seeks to close the digital divide with the rest of the European Union.

 

The sale is a key plank of TIM CEO Pietro Labriola's plans to revive the debt-laden, junk-rated former phone monopoly, which can ill afford the investments its ageing grid needs. The board started a review of KKR's offer, approving it on Sunday, TIM said, as per reuters.

 

The sale price of 18.8 billion euros, including debt, might rise to 22 billion euros if certain requirements are satisfied, according to TIM. According to prior reports, the earnout is mostly tied to a long-planned merger of TIM's infrastructure with that of state-backed fiber optic competitor Open Fiber. A arrangement like this would minimize competitive pressure on pricing.

 

The agreement, which TIM stated will be completed in the summer of 2024, would allow the company to lower its debt by around 14 billion euros. The cash-strapped TIM will also lay off half of its 40,000 domestic employees and concentrate on its service activities. "Two years of hard work ... culminate into a historic decision: creating two companies with new growth prospect," Labriola said.