Italy's TIM asks state lender to invest in last-mile network

ROME (Reuters) - Telecom Italia TLIT.MI has asked state lender CDP to invest in its last-mile network to allay Rome's concerns over the planned sale of part of the grid to U.S. firm KKR KKR.N, two sources close to the matter told Reuters.

The move comes as the Treasury prepares to play a more active role to help foster a deal between Telecom Italia (TIM) and Open Fiber to create a broadband national champion, the sources said.

TIM, partly owned by CDP, is in exclusive talks to sell KKR 40% of its secondary copper and fiber network running from the street cabinet to users’ homes.

For TIM such a deal could lay the groundwork for a merger of its last mile assets with those of smaller rival Open Fiber, a wholesale-only broadband operator owned by state-controlled utility Enel ENEI.MI and CDP.

Rome has long been pushing for a unified network with some state oversight to boost productivity across a country which has one of the lowest take-ups of fixed broadband in Europe.

But Rome is worried KKR could gain too much influence in any future combination with Open Fiber.

In a bid to soothe concerns, TIM’s Chief Executive Luigi Gubitosi suggested CDP invest in the company into which TIM will transfer its last-mile assets, one of the sources said.

Gubitosi tabled the option in informal talks with some Treasury officials, the same source said.

A second source, however, said CDP investing in TIM’s secondary grid would be “pointless” without guarantees from Enel that the project for a unified broadband network would go ahead.

Enel Chief Executive Francesco Starace does not oppose the idea of a single broadband network but has shown little enthusiasm for TIM’s plan which would see the former phone monopolist, which also has retail clients, keep control.

Economy minister Roberto Gualtieri was ready to help promote a deal between TIM and Enel, the sources said.

In June, Enel said infrastructure fund Macquarie had made an offer to buy all or part of Enel’s stake in Open Fiber.

A source said the Macquarie bid, for a stake of 30-50%, valued Open Fiber at 7.7 billion euros ($8.7 billion), including debt and incorporating the synergies of a tie-up with TIM.

Sources on Thursday said Enel had extended the talks with Macquarie until after the summer.

The economy ministry, TIM, CDP, Enel, KKR and Macquarie all declined to comment.

Reporting by Giuseppe Fonte, Elvira Pollina and Stephen Jewkes; Editing by Elaine Hardcastle