Italy secures veto powers on KKR’s telecom network venture

Italy’s Treasury will have veto powers concerning strategic issues involving the fixed-line network of Telecom Italia, opens new tab, as part of an agreement with KKR, opens new tab to take over the group’s infrastructure.

The powers will include being able to appoint the chair of a newly created company, dubbed Optics HoldCo, that will fully own the infrastructure, according to two sources briefed on the matter.

Approved by TIM’s board in December and cleared by Italy’s government this month, the deal values the network up to 22 billion euros ($23.83 billion), and establishes a wholesale-only player to provide broadband capacity to TIM and other telecoms operators.

The chairman of Optics HoldCo, to be appointed by the Treasury, will have veto powers on matters such as M&A involving the network assets, according to the people, declining to be named as the terms of the agreement are not public.

Rome, which plans to buy a 15-20% stake in the network venture for a up to 2.2 billion euros, will also have the power to prevent KKR from selling part of Optics HoldCo’s shares to unwanted investors under certain conditions.

KKR will have the right to appoint the majority of the holding company’s board, which will nominate the CEO after consulting shareholders.

In addition to the Treasury, KKR partnered in the deal with Canada Pension Plan Investments (CPP), which has joined KKR’s bid to take a 17.5% stake in Optics HoldCo, the sources said.

Abu Dhabi’s sovereign wealth fund ADIA, whose participation in the deal had already been disclosed in November, will take a 20% stake, the people added.

Italian infrastructure fund F2i said earlier this month it raised 1 billion euros to control about a 10% stake in the infrastructure. Reuters