Italy’s CDP bids for TIM’s grid to rival KKR approach

By Elvira Pollina and Giuseppe Fonte

MILAN (Reuters) -Italian state lender CDP said on Sunday its board had approved a non-binding offer for the fixed-line network of former phone monopoly Telecom Italia (TIM), adding it would be valid until March 31.

CDP has teamed up with Australian infrastructure fund Macquarie to bid for the whole of Italy’s most important telecommunications infrastructure.

The joint bid targets TIM’s landline network and submarine cable unit Sparkle. U.S. investment firm KKR has already presented an offer to buy a controlling stake in the same venture.

TIM said its board would discuss the CDP-Macquarie offer on “March 15 or on another date to be defined.”

In recent weeks, sources have told Reuters that CDP-Macquarie and KKR have both set an 18 billion-euro ($19 billion) enterprise value on TIM’s grid.

CDP’s offer would also involve TIM’s smaller fibre-optic network rival Open Fiber, which is owned by CDP and Macquarie and would be folded into TIM’s grid down the road.

KKR’s proposal, which rises to 20 billion euros when including a 2 billion euros earn-out, has given fresh impetus to efforts to revamp TIM after the failure of prolonged talks involving the government and TIM’s top two shareholders – CDP and France’s Vivendi.

Both figures are below the 31 billion euro price tag Vivendi has set to back selling the grid, for which TIM itself has indicated a valuation of 25 billion euros.

TIM said on Feb.24 KKR’s proposal “does not fully reflect” the value of its asset and added it would seek an improved offer by the end of this month.

The grid’s sale to cut TIM’s 25 billion euro debt pile and offload half of its 40,000 domestic staff is a main plank of CEO Pietro Labriola’s push to reshape the group.

The government of Prime Minister Giorgia Meloni has repeatedly said it wants to win control of TIM’s network while protecting jobs, but there is no common ground within the administration on how to proceed.

Under Italian rules, Rome has the power to block unwanted interest for assets of strategic importance such as TIM’s grid.

CDP’s move is welcome because it makes the sale process more transparent but still leaves several scenarios open, a senior government source said.

In its approach, KKR has left the door open to involving a state-run entity as a minority shareholder in TIM’s grid, but it opposes CDP playing such a role due to antitrust issues.

($1 = 0.9406 euros)

(Writing by Valentina Za; Editing by Louise Heavens, Emelia Sithole-Matarise, Ros Russell and Hugh Lawson)