KKR Could Lose the Battle for Telecom Italia—and Win the War
It is now KKR versus the Italian government in the battle for control of Italy’s broadband network. If that sounds like an unequal fight, it is—but that might work out fine for the U.S. private equity group.
Shares in Telecom Italia, Italy’s old telecommunications monopoly, jumped at the European open on Monday after it said late Sunday that it received a bid for its fixed-line network from a consortium comprising Italian state fund CDP and Australian infrastructure investor Macquarie. KKR bid for the network last month, having previously floated the idea of buying the entire company.
But this is no conventional bidding war. Everyone involved already has links with the asset. The most likely outcome is some kind of deal that works out for all parties—with the awkward exception of top Telecom Italia shareholder Vivendi.
CDP already owns about 10% of Telecom Italia, and Rome can veto the sale of assets deemed of strategic national value. CDP and Macquarie own a smaller broadband network, Open Fiber, that Rome has long wanted to merge with Telecom Italia’s. Meanwhile, KKR already has a minority stake in part of the Telecom Italia network now for sale. Losing the current bidding process could simultaneously hand it a profitable exit.
One uncertainty is the European Union antitrust process, which could get in the way of a network merger arranged by CDP. Another is Vivendi, whose 2015 bet on Telecom Italia has misfired badly. With an almost 24% stake it can vote down any deal, but its price expectations for the network business seem unrealistically high.
Yet the fresh bid does make it a bit more likely that something, finally, will happen to restructure debt-laden Telecom Italia—and bring Italy further into the digital age.