October 13, 2017 / 4:04 PM / 2 years ago

Italy regulator explores forced Telecom Italia network split: sources

MILAN/ROME (Reuters) - Italy’s communications regulator is considering whether it could force Telecom Italia (TIM) (TLIT.MI) to put its fixed-line network into a separate company to address competition concerns, three sources close to the matter said.

FILE PHOTO - Telecom Italia's new logo for the TIM brand is seen on a building in Rome, Italy, in this February 18, 2016 file photo. REUTERS/Tony Gentile/Files

Such a move would result in the network becoming a legal entity in its own right, with its own governance and management structure although the company would still be fully controlled by TIM, the sources told Reuters on Friday.

Politicians and rival phone companies have long called for TIM to separate its network, but pressure has increased since Rome took issue with the growing influence of French media group Vivendi (VIV.PA), which is its top investor with a 24 percent stake and recently appointed two of TIM’s top managers.

One option that could be explored to make the new company more independent from TIM would be to put representatives from the regulator, known by its acronym AGCOM, on its board, one of the sources said.

If it went ahead with the plan, AGCOM would follow the example of British counterpart Ofcom, which forced BT (BT.L) to separate its network unit Openreach. The deal was finalised in March after a two-year regulatory battle.

“It’s not easy to do, and TIM would likely fight it, but it’s technically possible,” one of the sources said, adding the watchdog was conducting a market analysis to establish whether there were any grounds that would justify such a move.

A TIM spokesman reiterated that the network, which is valued at up to 15 billion euros (13.38 billion pounds), is a strategic asset. He declined any further comment.

Italy’s biggest phone group is vertically integrated, which means it gives rivals access to its backbone infrastructure, but also competes with the same players in commercial activities.

While TIM has put in place measures to boost transparency and ensure equal access to competitors, notably by setting up an in-house structure called Open Access, the regulator regularly reviews the set-up to see whether any changes are needed.

AGCOM’s latest review will be concluded before the end of the year, two sources said, adding that if it is not satisfied, the regulator could take advantage of a European directive allowing it to impose the separation of the network.

What could prompt AGCOM to push for a split is the fact that Italy’s antitrust authority has opened two investigations into TIM’s broadband rollout this year, one of the sources said.

The regulatory review comes as Vivendi’s role at TIM is under increased scrutiny by the government which considers it a strategic asset.

The president of Italy’s ruling PD party said this week a separation of TIM’s network could lead to a merger of the infrastructure with that of broadband rival Open Fiber, which is jointly controlled by utility Enel (ENEI.MI) and state lender Cassa Depositi e Presiti (CDP).

Heavily-indebted, TIM has been criticized for putting off costly upgrades to its aging copper network.

Editing by Silvia Aloisi and Alexander Smith

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