Telecom Italia (Tim) will finalize the historic sale of its fixed-line network to U.S. fund Kkr on July 1, a deal that will make Tim the first telephone operator in a major European country to part with its fixed-line network.

WHAT IS TIM SELLING?

Tim's fixed fiber and copper network reaches nearly 89 percent of homes and spans more than 23 million kilometers across the country, making it the main component of Italy's telecommunications infrastructure.

WHAT WILL TIM LOOK LIKE AFTER THE SALE OF THE NETWORK?

Tim will move more than half of its Italian employees to the network company, remaining with about 16,000 employees in Italy. It will reduce its leverage by 14 billion euros to 1.6-1.7 times Ebitda after lease.

In the business plan prepared by CEO Pietro Labriola, with the sale of the network Tim will have greater commercial flexibility to compete in the domestic retail services market and may have more opportunities to explore M&A and partnerships.

In Italy, it will operate through Tim Consumer in the Internet and telephony services market for residential and small business customers, while Tim Enterprise will provide connectivity, cloud and cybersecurity services for large companies. In Brazil, Tim will continue to operate through its subsidiary TIM SA.

WHY IS TIM SELLING THE NETWORK?

Cornered by a net debt of 27 billion euros, Tim has decided to divest its core asset after years of unsuccessful efforts to restructure its domestic business, whose profits and revenues have been declining for years.

In addition to facing stiff price competition in the domestic market, Tim was further pressured by rising interest rates.

WHAT IS THE VALUE OF THE TRANSACTION?

Kkr, which was already a minority investor in FiberCop--the part of the network that runs from street cabinets to homes--valued Tim's entire access network at up to 22 billion euros, including about 3 billion euros in earnouts mostly related to a potential future combination of those assets with those of Open Fiber, in which Cassa Depositi e Prestiti has a stake.

WHAT IS THE ROLE OF THE ITALIAN GOVERNMENT?

The executive led by Giorgia Meloni approved the deal as part of a broader agreement with Kkr, which includes the Treasury's entry into the network company, which is considered of strategic importance, with a stake of up to 20 percent.

WHO ARE KKR'S OTHER PARTNERS IN THE NETWORK DEAL?

Italian infrastructure fund F2i will have a 10 percent stake, while Abu Dhabi's sovereign wealth fund Adia and Canada Pension Plan will have shares of 20 percent and 17.5 percent, respectively.

WHAT ABOUT TIM INVESTORS?

So far investors have shown little enthusiasm for the new Tim. The stock plummeted 24 percent when Labriola unveiled the prospects for the new business in March, and the stock has remained subdued.

Vivendi, Tim's main shareholder, is challenging Tim's decision to sell the network in court and questioning the sustainability of the remaining business.

(Translated by Chiara Scarciglia, editing Antonella Cinelli)