By Elvira Pollina and Emilio Parodi

MILAN (Reuters) -An Italian court on Tuesday rejected a request by Telecom Italia's top investor Vivendi to annul the former phone monopoly's decision to sell its landline grid to a consortium led by KKR.

France's Vivendi, which holds a 24% stake in TIM, filed a complaint with a Milan court in December 2023, arguing that the decision by TIM's board to approve the deal, worth up to 22 billion euros ($22.4 billion), was illegitimate.

Telecom Italia said at the time the board had acted within its rights. The deal was finalised last July.

The court said in a statement on Tuesday that Vivendi did not have grounds to pursue a legal action.

Vivendi said it intended to appeal the decision, saying the court had not addressed the merits of the case. It said it continues to believe that the sale of the network should have been subject to a vote at a shareholders meeting.

A Telecom Italia spokesperson declined to comment on the court ruling.

The sale of TIM's most valuable asset is part of a plan to reduce the former phone monopoly's debt pile and stabilise its finances. It has the backing of Giorgia Meloni's right-wing government, which has taken a 16% stake in the network.

Vivendi viewed the selling price of the network as too low and questioned the sustainability of the business left behind.

It said an extraordinary shareholder vote was needed to approve the sale, arguing the deal had changed the company's nature and any dissenting shareholders had the right to withdraw by selling their shares back to the company.

EXIT?

After a round of fruitless talks with Rome over TIM's future, Vivendi took a back seat as an investor and in January 2023 withdrew its representative on the board.

The Paris-listed group has signalled it is open to selling its stake in TIM, which has a value of about 950 million euros at current market prices, as it no longer considers it strategic.

The file has drawn interest from private equity firms, including CVC, according to people familiar with the matter.

However, any transaction needs support from the Italian government, which has the power to vet any sale of more than 3% of the company.

Italian state lender CDP is the second-largest investor in TIM, with a 10% stake.

(Reporting by Elvira Pollina and Emilio Parodi; Editing by Keith Weir, Gavin Jones and Jan Harvey)