Telecom Italia’s Network Separation Plan Rejected By Regulator

Italy’s communications regulator turned down Telecom Italia SpA’s plan to separate its landline network, saying a spinoff of the indebted carrier’s most valuable asset wouldn’t help boost competition in the domestic market.

The project, proposed last year by the Chief Executive Officer Amos Genish, would let the former phone monopoly continue to enjoy “a significant competitive advantage” nationwide except in Milan, Agcom said in a document posted on its website over the weekend. A spinoff wouldn’t ease any regulatory burden either, according to the government agent, which cited Telecom Italia’s plan to retain full control of the grid after a carve-out.

A representative for Telecom Italia declined to comment. Agcom will put its ruling, which was earlier reported by Bloomberg, to a 45-day public consultation. After that, the regulator will make a final decision.

Analysts have put a value of the network at 15 billion euros (USD 17 billion). The network, which Telecom Italia rivals need access to in order to provide their own broadband services, is considered of national importance to the Italian government.

Shareholder Clash

Telecom Italia is caught between its two largest investors — French media company Vivendi SA and U.S. activist Elliott Management Corp. as they clash over the company’s strategy. Vivendi wants Telecom Italia to keep control of the network, while Elliott prefers that it be relinquished.

Agcom’s decision may lead Luigi Gubitosi, who took over as Telecom Italia’s CEO in November, to withdraw the proposal in its current form, people familiar with the matter said.

Vivendi lost control of Telecom Italia to Elliott in May and has been pushing for a special shareholder meeting so it can propose a new slate of directors and restore its influence. An annual shareholder meeting has been set for March 29.

Telecom Italia faces growing competition and is struggling under one of the European telecom industry’s biggest debt burdens and heavy pension liabilities. It has not paid a dividend on its ordinary shares since 2013. The stock lost more than 30 percent of its value in the past 12 months.

Telecom Italia last week reported a slowdown in its home market and predicted pressure from competitors will continue to hold back earnings in 2019.—Bloomberg