KKR to absorb Telecom Italia’s debt in €18.8 billion acquisition

In a seismic shift for Italy’s communications landscape, Telecom Italia’s board has given the green light to an €18.8 billion ($20.2 billion) acquisition by KKR, signaling a bold move by the investment firm into European infrastructure amid financial tumult for the historic telecom operator. Battling a towering net debt that swelled by €800 million ($860 million) since last June and witnessing a sharp decline in EBITDA over four years, Telecom Italia has resolved to trim its financial liabilities through this landmark deal.

KKR to absorb Telecom Italia's debt in €18.8 billion acquisition

The agreement with KKR is expected to streamline Telecom Italia’s operations, allowing the company to focus on expanding its mobile networks and marketing fixed services using KKR’s platforms. Despite a dip in shares following the announcement, Telecom Italia remains optimistic, positioning the divestiture as a strategic liberation of assets to bolster its “delayering plan,” aiming for a leaner, more competitive stature in the telecommunications sector.

The transaction, however, is not without its political ramifications. The transfer of pivotal Italian infrastructure into American hands has sparked debate, but Italy’s Prime Minister Giorgia Meloni has endorsed the move. Further, her administration has earmarked up to €2.2 billion ($2.4 billion) for the Cassa Depositi e Prestiti (CDP) to secure a stake in the newly American-owned enterprise.

Yet, the plot thickens as Vivendi, a major stakeholder in Telecom Italia, vehemently opposes the board’s unilateral decision. Asserting that the transaction tramples shareholder rights, Vivendi vows to unleash a legal counteroffensive to overturn the board’s verdict. This unfolding drama not only casts Telecom Italia as a potential bellwether for Europe’s leading telecom firms but also underscores the intricate dance between corporate maneuvering and national interests in the continent’s shifting economic theatre.