Italy Backs Telecom Deal in Meloni’s Latest Activist Push

(Bloomberg) — Italy approved a decree Monday which empowers it to take a stake in Telecom Italia SpA’s network business, part of an effort by Prime Minister Giorgia Meloni’s increasingly activist government to assert more control over strategic assets.

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The decree gives cabinet backing to an agreement with US private equity firm KKR & Co. to jointly control Telecom Italia’s grid. Under the deal, which has been in the works for months, Italy is entitled to take as much as 20% of the business, the most valuable in the former monopoly’s portfolio.

“Our vision is the one that the center-right has always backed: assuming strategic control of the telecom network and protecting jobs,” Meloni said during the cabinet meeting, according to a statement distributed by her office.

“What we are taking today is a first step, which will be followed by more market-driven decisions,” she added.

KKR signed a preliminary agreement this month to include the government in its €23 billion ($25 billion) bid for the network, which Telecom Italia is offloading in an effort to trim gross debt of more than €30 billion.

The government is ready to spend as much as €2.2 billion on the deal, Economy Minister Giancarlo Giorgetti said at a news conference in Rome. A role is still possible for state lender Cassa Depositi e Prestiti “compatible with antitrust limits,” he added.

How and for how much to sell the asset has for years been a contentious issue with the company’s largest shareholder, France’s Vivendi SE, which earlier opposed the deal.

While the company is privately owned, the telecommunications business falls under the oversight of the government, which has the right to veto deals involving what it considers strategic assets.

The reason for the government’s decision to take a stake is “to have a say over issues of security and infrastructure that are vital for the future of the country,” Giorgetti said.

Meloni’s coalition, which inherited the unresolved problem of what to do with the network business from former Premier Mario Draghi’s government in 2022, has pledged to protect Telecom Italia’s 40,000 employees but for months disagreed on the best way to proceed.

The decision to become directly involved in the company’s ownership reflects Meloni’s interventionist strategy and her interest in keeping a direct control in the business.

The former telecoms monopoly has been grappling with a complex mix of high labor costs and the need for ever-expanding investments to modernize infrastructure.

(Updates with economy minister comments in sixth paragraph)

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