Telecom Italia SpA fell on Tuesday following a Bloomberg report that Italy’s state lender will drop its offer for the carrier’s landline network, ending a bidding war with KKR & Co.

The lender, Cassa Depositi e Prestiti SpA, and partner Macquarie Asset Management had decided to raise their previous offer last month, but will now plug on that plan, people familiar with the matter said. In April, Cassa Depositi, known as CDP, valued the network at €19.3 billion ($21 billion), the people said.

Concerns over antitrust issues may have played a part in the decision reported Monday, the people said, adding that the lender could have a role in a future phase of a network deal, which could still be disputed by Macquarie. No final decision has been taken and plans could change.

The shares fell as much as 4.2% in early trading in Milan, giving the company a market value of about €5.5 billion.

Spokespeople for Telecom Italia, the Italian government and CDP declined to comment. A spokesman for Macquarie declined to comment

Telecom Italia’s board earlier this month asked the two network bidders to increase their offers after an internal review found them “not yet adequate.” So far only KKR has expressed a willingness to improve its offer, people familiar with the matter said. The carrier wants final bids for the network by June 9.

Italy’s government has been monitoring possible employment fallout from a deal. Rome, which owns almost 10% of the carrier through CDP, holds so-called Golden Power rights that allow it to veto offers on assets deemed to be of strategic value. Prime Minister Giorgia Meloni’s government has said it wants to keep the network under public control.

But her rightwing administration wouldn’t stand in the way if the two contenders for the network joined forces, people familiar with the matter said earlier this month. CDP could in this way obtain a minority stake alone with other Italian investors, they said.

KKR’s improved bid also values the network at €21 billion, the people said, though that figure includes debt and €2 billion in a performance-based “earnout,” which would provide future compensation if the business achieved certain financial goals, they said.

Telecom Italia Chief Executive Officer Pietro Labriola is committed to an asset disposal plan aimed at cutting the company’s €30 billion gross debt pile.

--With assistance from Alessandra Migliaccio, Sonia Sirletti and Chiara Remondini.

Author: Tommaso Ebhardt, Daniele Lepido and Chiara Albanese