Telecom Italia recently announced that it has received a bid from the Italian government for its submarine-cable unit, Sparkle. This offer may bring an end to the ongoing negotiations with private-equity firm KKR regarding the business.
The telecommunications company stated that the government’s offer includes an option for TIM to retain a minority stake in Sparkle, although no details about the financial terms were provided.
According to sources, this bid could value Sparkle at approximately 625 million euros ($676.2 million) and may include additional payments worth around EUR125 million.
Previously, TIM was engaged in discussions with KKR for the sale of Sparkle; however, it rejected the initial bid deeming it too low. In November, TIM accepted a bid of over $20 billion from KKR for its other fixed-line assets as part of its strategy to reduce debt.
KKR has confirmed that it has not made a new offer for Sparkle. Although TIM granted KKR an extension until the end of January to submit a fresh offer for the unit, it remains unclear whether the government’s bid signifies the end of the talks with KKR.
The finance ministry of Italy submitted the offer on behalf of the government. TIM has stated that the offer will be reviewed at a meeting of the board of directors on Wednesday and is valid for 15 days.
Equita Sim’s Domenico Ghilotti expressed in a research note that divesting Sparkle would have minimal impact on the group’s efforts to reduce debt and its overall earnings.
In conclusion, Telecom Italia is considering a bid from the Italian government for Sparkle, which may result in terminating negotiations with KKR. The board of directors will review the government’s offer, and its impact on the company’s deleveraging efforts is expected to be limited.
