Quiver Quantitative - KKR (KKR) has won early European Union approval for its €22 billion ($23.8 billion) bid for Telecom Italia (BIT:TLIT) SpA’s landline network, paving the way for a deal that sees the ex-phone monopolist cede control of its most valuable asset. The European Commission said on Thursday that the deal was cleared without conditions or the need for an in-depth probe after its initial review revealed no competition concerns.
The EU’s merger watchdog said it “investigated the impact of the transaction on the market for wholesale broadband access services in Italy and concluded that it would not significantly reduce the level of competition.” Telecom Italia agreed last year to sell its landline network to KKR, aiming to slash its multibillion-euro debt pile. Italy will retain a minority stake in the network business due to its status as a strategic asset. State lender Cassa Depositi e Prestiti SpA already owns almost 10% of Telecom Italia.
Market Overview:
- KKR’s €22 billion bid for Telecom Italia’s landline network receives EU approval.
- EU Commission sees no competition issues with the landline network purchase.
- Italy retains a minority stake in the network business due to its strategic importance.
- Telecom Italia’s landline network sale aimed at reducing its significant debt pile.
- KKR and Telecom Italia agreed on a master services agreement to govern their relationship post-transaction.
- The EU Commission conducted an initial review, revealing no significant reduction in competition.
- The transaction, initially expected to be completed by the end of this summer, will now proceed without conditions.
- Regulatory oversight will continue to ensure compliance with EU and Italian antitrust rules.
- The deal’s impact on Italy’s competitive telecoms market will be closely monitored.
As a former monopoly operator, Telecom Italia has always been hamstrung by a complex mix of high labor costs and ever-higher investments to keep its network infrastructure up to date. Still, the real roots of the company’s troubles lie with Italy’s domestic telecommunications environment. The country has one of the world’s most competitive telecoms markets. Monthly subscriptions for full fiber landline services, which usually include unlimited internet, can cost as little as €20 to €25, about a quarter of what most US consumers pay.
The commission said that KKR and Telecom Italia also agreed on a master services agreement, or MSA, that will govern the relationship between the target and Telecom Italia post-transaction. “Although the MSA does not fall under the scope of EU Merger Regulation, it remains however reviewable under EU or Italian antitrust rules as well as subject to regulatory oversight,” it added. According to people familiar with the matter, KKR made an informal offer to maintain about 15 wholesale dark fiber existing contracts with Telecom Italia’s rivals at current prices, in order to assuage earlier EU concerns about the deal. Those concessions are, however, not legally binding.
This article was originally published on Quiver Quantitative