The two units serve Italy's public administration and small and medium businesses and had combined revenues of about 90 million euros ($109 million) in the fiscal year ending in March, less than 20% of BT's annual sales in the country.

BT, Britain's biggest fixed-line and mobile telecoms firm, will continue to operate in Italy serving some 400 multinational businesses and big companies, under a broader overhaul of its global operations.

Under the planned deal, TIM will expand its connectivity services to boost ongoing works to digitalise Italy's public administration and diversify its offer of cloud solutions for small and medium firms, the former phone monopolist said.

The transaction, whose value was not disclosed, is expected to be completed by the end of the first quarter of next year, subjected to antitrust clearance and consultation with trade unions.

BT's Italian unit was hit by an accounting scandal which required the company to take a 530 million pound ($705 million) charge in early 2017.

The group has some 900 workers in Italy, with 140 employed in the units involved in the deal, a trade union official said.

($1 = 0.8261 euros)

($1 = 0.7519 pounds)

(Reporting by Elvira Pollina, editing by Mark Potter)