Rome typically welcomes foreign investments but demands assurances that investors will follow the country's national interests. The government has special vetting powers to block unwanted bids in industries deemed of strategic importance.
TIM agreed in August to sell to KKR a 37.5% stake of a newly created company, FiberCop, into which it has transferred its 'last-mile' network connecting street cabinets to people's homes.
KKR now wants to sell up to 30% of the unit that will hold that stake to Infinity Investments, a subsidiary of the Abu Dhabi Investment Authority (ADIA), as it looks for co-investors in the Italian deal, the sources said, asking not to be named.
Abu Dhabi would then hold up to 11% of TIM's last-mile grid, provided the government authorised the deal, which is potentially worth 500 million-600 million euros ($600 million-$720 million).
"ADIA would be an indirect and passive investor," one of the sources said.
The Italian Prime Minister's office, TIM, ADIA and KKR all declined to comment.
Italy's industry ministry has informed the cabinet office of KKR's plans, and a technical body in charge of scrutinising foreign investments in strategic Italian assets plans to hear TIM's views on the matter in early December, the sources added.
Rome this month gave its conditional green light to KKR's acquisition of the last-mile network stake, demanding that the firm commit to a government-sponsored plan to create a unified ultra-fast broadband network. The government wants TIM to merge its landline grid, running from switching centres to households, with rival Open Fiber, which is jointly controlled by utility Enel and state lender Cassa Depositi e Prestiti (CDP).
Infinity Investments and KKR notified the government following the first clearance to the FiberCop deal, the sources said.
Co-sharing an investment is a normal practice funds use to reduce risks.
Australian fund Macquarie is considering the possibility of syndicating the purchase of a minority stake in Open Fiber from Enel, people familiar with the matter told Reuters last week.
The move has irked CDP, which does not want potential co-investors to have governance rights, one of the sources said on Monday.
($1 = 0.8338 euros)
(Additional reporting by Saeed Azhar and Davide Barbuscia in Dubai; Editing by Jan Harvey)
By Giuseppe Fonte and Elvira Pollina