Italy is planning to acquire the undersea cable division of Telecom Italia.

 TURIN (Reuters) - Italy's draft government decree published on Tuesday revealed that as part of an agreement with U.S. fund KKR to jointly bid for the group's landline infrastructure, the Italian Treasury might acquire 100% of Sparkle, a submarine cable unit of Telecom Italia (BIT:TLIT) (TIM).

On Monday, the cabinet approved two decrees allowing the Treasury to acquire a 15-20% share in NetCo, a joint venture between TIM's domestic fixed-access network and Sparkle's submarine cable division.

The Treasury will be allowed to purchase Sparkle "at a later stage," per the two documents saw by Reuters.

Sparkle, a wholesale telecommunications provider on a global scale, oversees a fiber cable network that totals more than 600,000 kilometers. The preliminary bid that KKR made for NetCo, insiders said, valued the company at up to 1.2 billion euros.

One of the orders indicated that the Treasury's investment in Telecom Italia's grid would be accorded the same property rights as other shares.

TIM's stock price in Milan increased by almost 2% at the open of trade on Tuesday.

Once debt and a few other variables are factored in, KKR's offer for NetCo comes to about 23 billion euros ($24.86 billion). However, the firm is willing to let the government join its bid and keep watch over the company, which is considered to be strategically important by Italian authorities.

The proposed regulation would permit the Treasury to make a binding offer on NetCo alongside KKR and other minority investors, culminating in a minority holding for NetCo worth up to 2.2 billion euros.

According to Reuters, the Italian infrastructure fund F2I plans to participate in the NetCo as well.

A source close to the situation told Reuters that state lender Cassa Depositi e Prestiti (CDP) may also invest with a minority share.

The Treasury will be granted governance rights in NetCo "including in the event of a change in the shareholding structure," according to the decrees, allowing it to monitor decisions of strategic importance and national security.

For a long time, Italian authorities have wanted to make sure investments were made to upgrade TIM's network to fast fiber optics because it is the country's primary telecommunications infrastructure.

($1 = 0.9252 euros)