Telecom Italia’s board has approved the sale of a minority stake in its secondary network to US private equity group KKR for €1.8bn, after delaying the decision earlier this month at the government’s request.

KKR Infrastructure, which had entered talks with the telecoms company at the beginning of the year, will acquire a 37.5 per cent stake in FiberCop, a new company owning Telecom Italia’s so-called last-mile network, which runs from streets to homes. KKR will help the company upgrade the copper parts of the grid to fibre.

Telecom Italia said on Monday that the deal was the first step in a “turning point” for Italy’s telecommunications system and the project would be “open” to different players.

Fastweb, an Italian broadband operator, will also hold a 4.5 per cent stake in the new company, after a joint venture between Telecom Italia and Fastweb, called FlashFiber, is incorporated into FiberCop.

Telecom Italia has also signed a memorandum of understanding for a strategic partnership with Tiscali, another Italian operator.

Luigi Gubitosi, Telecom Italia chief © Charlie Bibby/Financial Times

On August 4, the Italian government asked Telecom Italia to postpone the decision on KKR’s offer.

This was to allow time to try to carve out a merger deal with smaller rival Open Fiber, which is jointly run by state-controlled utility Enel and state lender Cassa Depositi e Prestiti (CDP). This would have accelerated creation of a single national broadband network.

On Monday, the board of directors of Telecom Italia and CDP agreed to negotiate a separate deal to ensure a significant presence of the state lender in the future single broadband network company, according to a statement by CDP. It will be named AccessCo.

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Under the plan, Telecom Italia will maintain the majority stake in a new company that will incorporate its secondary and primary networks as well as Open Fiber, while governance would be shared with CDP, according to several people involved in the discussions. Enel declined to comment.

Luigi Gubitosi, Telecom Italia chief, has championed the idea of a single national broadband operator for some time.

The company’s three-year business plan, unveiled in March, pointed to the KKR deal as the first step towards creating a single national network and envisaged the integration with Open Fiber to avoid duplications.

However, disagreements with Enel over the terms of the deal meant enthusiasm for the plan dwindled, according to several people briefed on the talks.

Via Financial Times