(Bloomberg) — Italy’s communications regulator Agcom rejected Telecom Italia SpA’s landline network separation plan, saying it wouldn’t be a boost to competition in the domestic phone market, according to a document seen by Bloomberg.
The plan, proposed last year by former Chief Executive Officer Amos Genish, would let the country’s largest phone company to continue “enjoying a significant competitive advantage with the exception of the municipality of Milan,” the document says. That’s mainly because Telecom Italia plans to keep the full control of the separated network, it said.
The grid spinoff wouldn’t ease any regulatory burden either, according to the document. Representatives for Agcom and Telecom Italia weren’t available to comment outside normal business hours.
Agcom’s decision may result in Telecom Italia CEO Luigi Gubitosi deciding to withdraw the grid separation proposal in its current form, people familiar with the matter said.
The landline network is the former phone monopoly’s most valuable asset at an estimated 15 billion euros ($17 billion), according to analysts. It’s also considered of national importance to the Italian government, which may push for a merger of Telecom Italia’s grid with Open Fiber SpA, according to Deputy Premier Luigi Di Maio.
Shareholders Clash
Telecom Italia is caught between its two largest investors, which are clashing over strategies. French media company Vivendi SA lost control of Telecom Italia to U.S. activist Elliott Management Corp. 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.
Vivendi wants Telecom Italia to keep control of the network, while Elliott prefers that it be relinquished.
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 around a third of its value last year.
Telecom Italia last week reported a slowdown in its home market and predicted pressure from competitors will continue to hold back earnings in 2019.
To contact the reporter on this story: Daniele Lepido in Milan at [email protected]
To contact the editors responsible for this story: Rebecca Penty at [email protected], Shamim Adam, Andrew Janes
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