The private equity firm’s bid, characterized as friendly, could just be the beginning of a fight to control Telecom Italia and the former Italian monopoly’s most precious asset: the landline network. Separately two other private equity funds, Advent International Corp. and CVC Capital Partners, said they’re open to work with all  stakeholders to identify how to help Telecom Italia.

Among any deal’s goals would be stopping the freefall in the company’s shares, which have lost half their value in five years, and handling the net debt that stood at 22 billion euros as of September. The deal would require support from Telecom Italia’s directors and managers, as well as approval by the government.

Vivendi is unlikely to support KKR’s offer, which it views as undervaluing Telecom Italia, according to one person with direct knowledge of the situation. The French company will analyze the reasons behind the bid, including whether the firm was brought in by Chief Executive Officer Luigi Gubitosi, the person said.

A spokesman for Vivendi in Paris reiterated that company is long-term shareholder in Telecom Italia since the start and plans to remain so. Vivendi also said it will continue working closely with Italian authorities for Telecom Italia’s success. The representative declined to comment further on the bid.

The French company’s 24% stake in Telecom Italia was acquired at an average cost of 1.03 euros, Bloomberg Intelligence analyst Erhan Gurses wrote in a note before the board statement, saying that may create an “insurmountable obstacle.”

Government Support

In a statement following the board meeting, Mario Draghi’s government said the interest is “good news” for the country, but the quality of the plan will be gauged by market reaction. Rome will carefully review any plan affecting Telecom’s network and will create a special group to monitor the offer.

The offer puts the spotlight on governance problems at the Italian company, the worst-performing stock in the FTSE MIB Index in the past six months, said the person familiar with Vivendi’s likely objections. These problems range from bad handling of profit warnings, a lack of strategic vision and an incapacity to find solutions for the company’s network, the person added.

The deal would rank as one of the five biggest transactions in the telecommunications this year and would be one of the largest telecom purchases ever in Europe by a private equity firm.

Competitive Market

Telecom Italia operates in one of the world’s most competitive telecommunications markets, with cut-price offers from rivals eroding the former state-owned monopoly’s margins. CEO Gubitosi’s efforts to boost premium services failed to reverse the decline and he has been under mounting pressure from Vivendi to accelerate turnaround plans after Gubitosi gave a surprise profit warning last month.

Telecom Italia’s shares have declined about 50% in the past five years and their current price is about 1.2 times earnings, a fraction of the 14 times averaged by its European peers, according to data compiled by Bloomberg. The company sits on a net-debt pile of more than 22 billion euros as of the end of September. That may be down 3.3 billion euros from the previous year, but S&P Global Ratings cut Telecom Italia’s rating to BB from BB+ on Friday.

Corriere della Sera reported on a KKR bid earlier on Sunday. Bloomberg News reported this month that KKR was considering a takeover of Telecom Italia’s fiber unit, FiberCop. KKR bought a 37.5% stake in FiberCop last year for 1.8 billion euros.

Gubitosi’s strategy to revive earnings has focused on trying to sell more expensive subscription packages that bundle fiber broadband with streaming, video gaming and mobile connections. That premium strategy hasn’t reversed the decline, and the company last month reported third-quarter earnings slightly below analyst estimates and lowered its targets through 2023.