Italy intervenes to suspend sale of Telecom Italia stake to KKR

The Italian government asked Telecom Italia SpA in the middle of its board meeting on Tuesday to suspend the sale of a stake in its landline network for one month, according to people familiar with the matter.

The government led by Giuseppe Conte asked the telecommunications company to delay the purchase of the company’s so-called secondary network by KKR & Co, as the government is seeking to create a single national telecom infrastructure, the people said, who asked not to be named because the decision isn’t public.

The unprecedented request marks another major intervention by Conte’s government into a decision of a private listed company after Autostrade, where the Benettons are being forced to exit the toll-road operator following a deadly bridge collapse in 2018. With Telecom Italia, Conte wants to create a single national ultrabroadband operator.

Chief Executive Officer Luigi Gubitosi has been trying since last year to advance this goal through a combination with government-backed rival Open Fiber SpA, a joint venture between Italy’s largest utility Enel SpA and state lender Cassa Depositi e Prestiti SpA. The government made the request to Gubitosi’s board Tuesday as it would like CDP to be involved in the stake sale, the people said.

“The board of directors looked very favorably upon the idea to speed up the Single Network project and will be enthusiastically taking part in the works the Government intends to launch over the next few hours,” Telecom Italia said in a statement. The CEO will “discuss all the relevant aspects with the government authorities.”

New Deadline

Both Telecom Italia and KKR agreed to the suspension, which will see them postpone the sale of part of the asset until Aug 31, the people said. The phone company’s board will meet again on that date, they said.

The government doesn’t want to interfere with Telecom Italia, but rather demonstrate a strong commitment to promoting a national and integrated ultrabroadband network, according to a government official. Telecom Italia’s project is important and the government is available to improve it in a wider strategic context, including the involvement of other institutional and market players, the official said.

On Tuesday Italy submitted a project to create a single network to the phone company’s board, the official said.

Representatives for Telecom Italia and KKR declined to comment on further details.

Telecom Italia’s board of directors had gathered to approve the company’s second-quarter results, and were close to approving the sale to KKR of a 37.5% stake in the portion of its network that covers cables running from the street to premises, the people said.

Italy’s largest phone company reported sales of 3.8 billion euros in the second quarter, slightly missing the 3.84 billion euro consensus of analyst estimates compiled by Bloomberg.

Net income dropped to 118 million euros from 386 million euros a year earlier as the pandemic hurt footfall and depressed roaming fees. The company said it sees service revenue dropping in the mid-single digits for the full year.