In an effort to close its digital gap with the rest of Europe, Italy has been pushing for a unified network combining Telecom Italia's (TIM) assets with those of Open Fiber, a wholesale-only operator owned by Enel and state lender Cassa Depositi e Prestiti (CDP).
TIM, partly owned by CDP, has been in talks for months over a merger of its fibre network assets with those of Open Fiber, but differences over issues such as governance and regulation have created a deadlock.
Economy Minister Roberto Gualtieri requested a memorandum of understanding be signed by the end of the month at a meeting with Enel chief Francesco Starace on Friday, said the source, who spoke on condition of anonymity.
Rome has already been pushing Enel and TIM to join forces, but Gualtieri's deadline was the most concrete step to break the stalemate over the network expected to underpin the development of Italy's digital economy.
The economy ministry and Enel both declined to comment. TIM was not immediately available for comment.
TIM's insistence on retaining control of any combined entity with Open Fiber has also held up a deal. But pressure for agreement has increased as TIM has held talks with U.S. private equity fund KKR about selling 40% of its secondary or last-mile copper and fibre network from the street cabinet to users' homes.
With a binding offer expected before Aug. 4 that could see the U.S. fund taking a significant position in Italian telecoms infrastructure, the Treasury wants to nail down guarantees from Enel over the broadband network plan.
To balance KKR's presence, the government would be in favour of the CDP taking a stake in the secondary network but any such deal would not be in the public interest without guarantees from Enel on the broadband network plan, said the source on Saturday.
Complicating the discussions is a separate offer from Australian fund giant Macquarie for all or part of Enel's 50% stake in Open Fiber that sources say values the wholesale operator at almost $8 billion.
(Reporting by Giuseppe Fonte, additional reporting by Elvira Pollina and Stephen Jewkes. Editing by Jane Merriman, Giselda Vagnoni and Christina Fincher)
By Giuseppe Fonte