Chief Executive Pietro Labriola said TIM would not comment on a non-binding bid from KKR for its landline grid until a board meeting scheduled for Feb. 24.

But he told analysts that TIM needed to take "extraordinary measures" to reduce its leverage.

Net financial debt stood at 25.4 billion euros ($27.2 billion) at the end of 2022, up by 3.2 billion euros from the year before.

Labriola was speaking after TIM late on Tuesday unveiled a new set of financial targets indicating a return to growth this year after its 2022 earnings fell less than initially feared.

TIM expects group core earnings including lease costs to grow by a 'low to mid single digit' figure this year after a 10.6% drop in 2022, with key service revenue in its battered domestic market seen broadly stable.

By 1120 TIM shares were up 1.3% against a slightly lower Italian blue chip index.

Hit by a steady erosion of earnings and sales over the past decade amid tough competition at home, TIM is seeking a turnaround centred on a sale of its prized landline grid.

KKR, already a minority investor in TIM's landline grid, this month offered to buy a controlling stake in a venture comprising TIM's fixed network and submarine cable unit Sparkle.

Two sources familiar with the matter said KKR values the venture at 20 billion euros, including an earnout of some 2 billion euros.

TIM's second biggest investor, state lender CDP, is also studying an offer together with Australian infrastructure fund Macquarie for an asset over which the government has special powers to block unwanted interest.

(Reporting by Elvira Pollina; Editing by Keith Weir)

By Elvira Pollina