By Giuseppe Fonte and Elvira Pollina

ROME (Reuters) – Telecom Italia (TIM) is leaning towards entering talks with KKR over the sale of its prized landline grid, two sources said, as the U.S. fund’s offer is seen as preferable to a rival bid tabled by a consortium led by state lender CDP.

KKR’s approach incorporates a value for TIM’s fixed landline network that could top 23 billion euros ($25 billion). CDP and its partner, Australian fund Macquarie, have offered 19.3 billion euros and their bid raises antitrust issues given their joint ownership of rival fibre optic firm Open Fiber.

TIM directors gathered on Monday to review the bids ahead of a new meeting on June 22 to designate a preferred bidder.

Asking not to be named due to the sensitivity of the issue, two sources close to the matter told Reuters the board was expected to grant KKR a period of talks to negotiate a deal.

The value of KKR’s bid hinges on the terms of the contracts that will tie the network to TIM’s remaining business, meaning its services operations, sources previously said.

TIM plans to analyse in depth the terms to be proposed by KKR, one of the sources said.

TIM and KKR declined to comment.

The network sale is a key plank of Chief Executive Pietro Labriola’s strategy to relaunch TIM by slashing the former phone monopoly’s 25 billion euro debt.

But Labriola’s plans have run into stark resistance from top investor Vivendi, which wants any sale of TIM’s main asset to value it at 31 billion euros.

With its 24% stake in TIM, Vivendi also wants any decision on the grid to go through an extraordinary shareholder vote, requiring a qualified majority.

Having already invested 1.8 billion euros in the grid, KKR has bid for a controlling stake in a unit comprising TIM’s entire domestic fixed access network and submarine cable business Sparkle.

It has left the door open to Italy’s Treasury or other state-backed entities – including CDP and infrastructure fund F2i – becoming a minority shareholder in the network company, officials have previously said.

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To free CDP’s hands were it to invest in the grid, the Open Fiber setup could be reviewed. KKR is also ready to let TIM retain a stake in its landline network.

That chimes with the stance of Economy Minister Giancarlo Giorgetti, who has repeatedly said there are “multiple options” to ensure the government has “strategic control” of TIM’s grid, indicating Rome does not need to own a controlling stake.

Prime Minister Giorgia Meloni’s administration will have a say on any deal as Rome can use its “golden powers” rules to set conditions or block bids for strategic assets such as TIM’s network.

($1 = 0.9143 euros)

(Reporting by Giuseppe Fonte and Elvira Pollina; Editing by Valentina Za, Kirsten Donovan)