MILAN (Reuters) - Moody's on Wednesday raised Telecom Italia's credit rating by one notch to Ba3 and maintained a positive outlook as the debt-laden telecoms company nears the completion of the sale of its fixed-line access network to KKR for up to 22 billion euros.

Moody's upgrade followed the unconditional approval of the deal by the European Union antitrust authority.

WHY IT'S IMPORTANT

Moody's had put the Telecom Italia (TIM) rating on review for upgrade by one to two notches after the company approved the KKR deal in November.

Backed by the Italian government, the network sale is a key plank of TIM CEO Pietro Labriola's strategy to revamp the ailing former phone monopoly, which has been under pressure for years due to stiff price competition in its domestic market.

BY THE NUMBERS

The network sale will reduce TIM's debt by 14 billion euros. Moody's expects the telecoms company leverage (adjusted gross debt/EBITDA) to fall towards three times the group's core earnings by 2025 from 5.6 times before the network transaction.

KEY QUOTES

"The rating upgrade primarily reflects the expected improvement in Telecom Italia's financial profile, which will more than offset the weaker business profile", said Moody's analyst Ernesto Bisagno.

"The transaction is likely to make Telecom Italia's business model more exposed to the volatile market conditions in the domestic market".

"The negative impact on the business profile is partially offset by the fact that Telecom Italia will benefit from increased commercial flexibility following the separation, which should support its competitive position in the retail market".

CONTEXT

Moody's stripped TIM of its investment grade status in 2013. After Wednesday's upgrade, TIM remained three notches below Moody's investment grade status.

TIM is expected to complete the network deal in the coming weeks and focus on its retail service businesses for consumer and enterprise customers.

(Reporting by Elvira Pollina; Editing by Leslie Adler)