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Telecom Italia Said to Be Near Picking KKR for Fiber Deal

Daniele Lepido

(Bloomberg) -- Telecom Italia SpA is close to picking the private equity giant KKR & Co. to help it acquire wholesale fiber carrier Open Fiber SpA, according to people familiar with the matter.

Telecom Italia is choosing the U.S. investment firm because it’s also open to purchasing a minority stake in a portion of the Italian company’s landline network, the socalled “secondary network” of copper and fiber lines running from street cabinets to premises, that’s valued by KKR at 7 billion euros ($7.6 billion) to 7.5 billion euros, said the people, who asked not to be named because the discussions are private.

Telecom Italia shares rose as much as 3.2% at the market open in Milan, their biggest intraday gain since November.

The larger goal is building a single national network, an approach favored by the Italian government led by Premier Giuseppe Conte.

Since last year, Telecom Italia Chief Executive Officer Luigi Gubitosi has considered enlisting international funds to help finance a potential network deal with rival Open Fiber, people familiar with the matter said at that time. Gubitosi is also looking to boost demand for premium services, work along with rivals on network investments to cut costs, and spin off noncore assets.

Open Fiber’s investors include Italy’s state lender Cassa Depositi e Prestiti and the country’s largest utility, Enel SpA. Francesco Starace, CEO of Enel, said last week in an interview with Börsen Zeitung that he isn’t going to sell the company’s stake in Open Fiber. In contrast, Cassa Depositi would be open to selling its Open Fiber stake, another person said.

Spokespeople for Telecom Italia and KKR declined to comment. Representatives for Open Fiber and Cassa Depositi weren’t available after business hours.

Open Fiber reported full-year 2018 revenue of 114 million euros. Its active customers numbered 500,000 at the end of that year, and the company reached more than 5 million households with its fiber network.

(Updates with share price in third paragraph)

--With assistance from Liana Baker.

To contact the reporter on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net;Rebecca Penty at rpenty@bloomberg.net

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