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Telecom Italia shares slide after Vivendi challenges network grid sale

Shares in Telecom Italia slid on Monday after investor Vivendi (VIV.PA) said it would challenge the former phone monopoly’s plan to sell its network grid in a 19 billion euro ($20.4 billion) deal.

The sale to KKR would make TIM the first telecoms group in a major European country to part ways with its landline grid, and is a key plank of TIM CEO Pietro Labriola’s plan to revive the debt-laden group.

However, after initially rising as much as 5%, TIM shares went into reverse and were off earlier lows but still down around 2% by 1050 GMT, reflecting fears that the transaction could yet face legal hurdles.

Vivendi, which owns a 24% stake in TIM, said late on Sunday that it considered the decision to proceed without a shareholder vote as “unlawful” and that it would use “any legal means at its disposal to challenge” the move.

The French media group has been pushing for a higher sale price and also questioned the sustainability of what will remain of TIM once the network is sold.

To oversee an asset deemed of national strategic importance, Italy’s government has authorised the Treasury to spend up to 2.2 billion euros to take a 20% stake in the network alongside KKR, which is already a minority investor in the grid.

Economy Minister Giancarlo Giorgetti played down the threat to the deal.

“We made an offer and the TIM board accepted it. Now obviously shareholders have their rights and will exercise them in the appropriate venues, but this deal is the plan,” he told reporters on Monday.

Investors would also be mindful that Vivendi fought a long legal battle in courts across Europe with the Berlusconi family’s Mediaset company, now known as MFE-MediaForEurope (MFEB.MI), over a failed 2016 pay TV deal.

The TIM board approved the sale with 11 directors in favour and three against after meetings that stretched from Friday until Sunday evening.

The sale, which TIM said should close in the summer of 2024, would allow the group to reduce its financial debt by around 14 billion euros.

Cash-burning TIM would also shed half of its 40,000 domestic staff and focus on its service operations.

The sale’s 18.8 billion euro price tag, including debt, could reach 22 billion euros if certain conditions are met, TIM said.

Equita analysts, who have a “buy” rating on TIM, said they expected the deal to proceed.

“We believe that the chances of blocking the transaction at this stage are limited,” they said in a note.

TIM has mandated CEO Labriola to seek an improved deal for its Sparkle submarine unit. Sources said KKR valued the venture at around 650 million euros, while TIM is looking for a price tag of about a 1 billion.

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