Telecom Italia's wireline network spinoff could speed broadband rollouts

Telecom Italia's (NYSE: TI) move to spin off its wireline last mile network may enable it to raise money to invest in new network services and hasten broadband rollouts in the country, an analyst said.

"This move is likely to give the company more flexibility in the retail market, where they currently have to wait for the regulator's approval before they can market their offers," said Luca Schiavoni, regulation analyst at Ovum. "It will also be a way to reduce its debt and find new sources of profit, given that access services are no longer as profitable as they used to be in the previous years due to the downward trend of regulated access prices for services such as LLU and bitstream."

The telco's board of directors, which approved the spinoff plan yesterday, are continuing talks about selling a minority stake in the new company to Cassa Depositi e Prestiti.

Hong Kong conglomerate Hutchison Whampoa has also expressed interest in acquiring a large stake in Telecom Italia, proposing to collapse its 3 Italia unit into the larger company.

However, a Reuters report said that "differences over governance issues and price" threaten a deal with Hutchison from happening.

Under the new "Equivalence of Input" (EoI) model, Telecom Italia said that any service provider (competitive providers and Telecom Italia) would have access to the wireline network.

Similar to BT Openreach (NYSE: BT), the new company would offer any service provider various wholesale services such as Unbundling of the Local Loop (ULL) and Virtual Unbundling Line Access (VULA) for next-generation networks leveraging fiber to the cabinet (FTTC) and fiber to the home (FTTH) architecture.

"Competitors should welcome the creation of a separate company that would manage the network following the Equivalence of Inputs (EoI) model, which has arguably worked very well in the UK with Openreach, the functionally separated arm of BT," Schiavoni said. "This is likely to improve the conditions under which access services are offered to alternative operators."

For more:
- see the release
- Reuters has this article

Related articles:
Telecom Italia values fixed network at €13B-€15B; delays spin-off decision
Alcatel-Lucent takes lead in VDSL segment, says Dell'Oro

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