Italy set to take over Telecom Italia’s submarine cable unit -draft

Italy’s Treasury can take full ownership of Telecom Italia (BIT:TLIT)’s (TIM) submarine cable unit Sparkle as part of an agreement with U.S. fund KKR to jointly bid for the group’s landline grid, a draft government decree showed on Tuesday.

The cabinet on Monday approved two decrees providing for the Treasury to take a 15-20% stake in NetCo, a venture comprising both TIM’s domestic fixed-access network and submarine cable unit Sparkle.

According to the two documents seen by Reuters, the Treasury will also be able to acquire Sparkle “at a later stage”.

An international wholesale telecoms operator, Sparkle manages fibre cables that stretch over 600,000 kilometres. It was valued at up to 1.2 billion euros in KKR’s preliminary bid for NetCo, sources have said.

The Treasury stake in Telecom Italia’s grid would have the same property rights assigned to other shares, one of the decrees indicated.

TIM’s Milan-listed shares rose by more than 2% in early trading on Tuesday.

KKR has offered around 23 billion euros ($24.86 billion) for NetCo once debt and a number of variable items are included, while leaving the door open for the government to join its bid and maintain oversight of the asset, which is deemed of strategic importance by Italian authorities.

The draft decree authorises the Treasury to submit a binding offer alongside KKR and other minority investors over NetCo, resulting in a minority stake for it worth a maximum 2.2 billion euros.

Reuters has previously reported that Italian infrastructure fund F2I is also set to invest in the NetCo.

State lender Cassa Depositi e Prestiti (CDP) could also invest with a single-digit stake, a source familiar with the matter told Reuters.

The decrees envisage governance rights for the Treasury in NetCo allowing it to oversee decisions of strategic importance and national security “including in the event of a change in the shareholding structure”.

TIM’s network is Italy’s main telecommunications infrastructure and government authorities have for years been looking to ensure investments are carried out to upgrade it to fast fibre optics.

($1 = 0.9252 euros)