Italy has paused the plans of private equity fund CVC and French telecom operator Iliad to invest in Telecom Italia (TIM) and consolidate the telecom sector. Sources indicate that the Italian government has not been receptive to these proposals, which has hindered progress for both companies.

In a related development, state-backed Poste Italiane is preparing to acquire a 9.8% stake in TIM from state lender CDP. This move is expected to be announced soon and could position Poste as a significant player in future consolidation efforts involving TIM. Both Poste and TIM have refrained from commenting on the situation.

TIM has attracted interest from CVC and Iliad following its sale of a valuable landline network to a KKR-led consortium last year, part of a government initiative to reduce debt. CVC aimed to acquire a 24% stake in TIM that French media group Vivendi is contemplating selling, while Iliad seeks to merge its Italian operations with TIM.

Despite CVC's negotiations with Vivendi to become TIM's largest investor, the lack of government approval has stalled the deal. Similarly, Iliad has not received government support for its plans, as key members of Prime Minister Giorgia Meloni's administration are hesitant to allow a foreign investor to take control of TIM.

The Italian government views TIM as a strategic asset, requiring its approval for any acquisition exceeding 3% of the company's capital. This regulatory environment underscores the challenges faced by foreign investors in the Italian telecom market.