By Elvira Pollina

MILAN (Reuters) -Telecom Italia (TIM) on Sunday authorized the 19 billion euro ($20 billion) sale of its fixed-line community to U.S. non-public fairness agency KKR, turning into the primary telecoms group in a significant European nation to half methods with its landline grid.

The deal, backed by Prime Minister Giorgia Meloni’s conservative administration, includes an asset that Italy deems of nationwide strategic significance as it really works to bridge its digital divide with the remainder of the European Union.

The sale is a key plank of TIM CEO Pietro Labriola’s plans to revive the debt-laden, junk-rated former telephone monopoly, which might ailing afford the investments its ageing grid wants.

The board began a evaluate of KKR’s supply on Friday, approving it on Sunday, TIM mentioned.

The sale’s 18.8 billion euro price ticket, together with debt, may attain 22 billion euros if sure situations are met, TIM mentioned.

The earnout is generally linked to a long-mooted mixture of TIM’s grid with that of state-backed fibre optic rival Open Fiber, sources had beforehand mentioned. Such a deal would scale back aggressive strain on costs.

The deal, which TIM mentioned ought to shut in the summertime of 2024, would enable the group to cut back its monetary debt by round 14 billion euros.

Money-burning TIM would additionally shed half of its 40,000 home workers and concentrate on its service operations.

“Two years of laborious work … culminate right into a historic choice: creating two firms with new development prospect,” Labriola mentioned in an announcement.

To supervise an asset deemed of nationwide strategic significance, Italy’s authorities has authorised the Treasury to spend as much as 2.2 billion euros to take a 20% stake within the community alongside KKR, which is already a minority investor within the grid.

The Treasury already controls TIM’s second-largest investor, state lender CDP.

TIM mentioned it will not put the board’s choice to a shareholder vote, in a setback for main shareholder VivendI.

Vivendi (OTC:), which owns 24% of TIM, has been looking for the next value and questioned the sustainability of the enterprise left behind. It mentioned on Sunday it thought of the board’s choice “illegal”, including it will use “any authorized means at its disposal to problem” it.

In Vivendi’s view, the sale required a unprecedented shareholder vote and clearance from an inside TIM board committee for associated celebration transactions, on condition that the Treasury controls TIM investor CDP and is investing within the grid.

TIM on Sunday additionally dismissed as not in step with its technique an alternate plan pitched in latest weeks by London-based funding agency Merlyn Advisors, which Vivendi had referred to as on the board to evaluate.

“Merlyn … reserves the opportunity of taking any steps that might deliver the board to name … a shareholder assembly to determine whether or not the plan authorized on Sunday is what shareholders need,” Merlyn mentioned in a notice.

($1 = 0.9321 euros)