Italy’s CDP decides to compete with KKR to buy TIM’s grid

Italy’s CDP decides to compete with KKR to buy TIM’s grid

The Italian state lender is partnering with an Australian fund to challenge KKR’s offer.

This week, Italian state lender CDP said its board had approved a non-binding offer for the fixed-line network of former phone monopoly Telecom Italia (TIM), according to Reuters.

CDP has partnered with Australian infrastructure fund Macquarie to bid for the whole of Italy’s most important telecommunications infrastructure. The joint bid, which is valid until March 31, targets TIM’s landline network and submarine cable unit Sparkle.

Reuters also reports that US investment firm KKR has already presented an offer to buy a controlling stake in the same venture. In fact, sources have told Reuters that CDP-Macquarie and KKR have both set an 18 billion-euro enterprise value on TIM’s grid.

CDP leverages structural advantages

A major difference between the two offers is that CDP’s plan would also involve TIM’s smaller fibre-optic network rival Open Fiber, which is already owned by CDP and Macquarie. The plan is that Open Fiber would be folded into TIM’s grid at a later date.

TIM’s CEO Pietro Labriola is pushing to reshape the group.The grid’s sale to cut TIM’s 25 billion euro debt, while laying off half of its 40,000 domestic staff, ia a major part of Labriola’s plan, according to Reuters.

That plan seems at odds with pronouncements by Italian Prime Minister Giorgia Meloni’s government, which has repeatedly said it wants to win control of TIM’s network to protect jobs. Still, Reuters reports there is no common ground within the administration on how to proceed.

One important consideration that may play a role: under Italian law, the government has the power to block unwanted acquisition bids for assets of strategic national importance such as Telecom Italia’s grid.

A senior government source told Reuters that CDP’s move is welcome because it makes the sale process more transparent but still “leaves several scenarios open.