There has been much talk in Italy over the past few months of a possible telecommunications network spin-off. After being put on hold temporarily, the process has commenced following approval by the board of the telecommunications regulator.
The project envisages a corporate split that will lead to the formation of two new companies: Opac and Ti ServiceCo. The spin-off should be completed in 2013 or in early 2014 at the latest. The implementation of the access network spin-off was put on hold, according to the board decision, until verification of the regulatory path that was made more uncertain by AGCOM's (the Italian communications authority) decision to lower unbundling rates for 2013.
Telecom Italia Chairman Franco Barnabè remains optimistic about the feasibility of the transaction and the timeframe for AGCOM's verification process. AGCOM Chairman Angelo Cardani likewise expressed his positive opinion of the spin-off during the presentation of the annual report: "The separation of the Telecom network may be an opportunity directed at creating other opportunities." With this statement, AGCOM (to which Telecom Italia submitted the transaction for examination) has given the spin-off its de facto approval, while specifying that possible regulatory simplifications will be fine-tuned on the basis of the network perimeter to be spun off and according to the actual division of control.
Cardani further underlined that:
"the spin-off may represent a permanent solution to the conflict between incumbent/incoming operators that is typical of network industries: the wider (with the perimeter of transferred assets including also active network elements) and deeper (towards an actual separation of control) the spin-off is, the more substantial the regulatory dividend could be."
Regarding regulatory concessions, three elements have been mentioned in particular:
- the perimeter of the assets to be spun off;
- governance; and
- equivalence of input.
This last point would be a prerequisite, although at present AGCOM has not made it a necessary condition. According to the European Commission, this condition would be more effective than the equivalence of output in ensuring equal access and would therefore strengthen competition in the telecommunications market. In addition, questions have been raised over who will appoint the new company's governance and which method will be used to do so; similar questions have been raised regarding the investment plan and control of the equal treatment guaranty.
On conclusion of all necessary procedures and the complex regulatory process, Telecom Italia will split into two companies. Opac, which will belong to Telecom Italia, will manage and develop passive network infrastructure (eg, cable ducts, copper pairs, converters, cabinets and related electronic systems, and passive optical fibre). Moreover, this new company will provide all operators, including TI ServiceCo, with infrastructure services for both copper and optical fibre networks. The other company, TI ServiceCo, will cover all other activities presently undertaken by Telecom Italia (eg, the sale of wholesale and mobile services).
At present, the main issue concerning the transaction remains unresolved – that of the new company's corporate future. Fondo Strategico Italiano, which has already concluded transactions involving electricity and gas infrastructures with Terna and Snam, is apparently interested in the operation.
Greater attention should be paid to next-generation networks in the spin-off process – a sentiment echoed by European Commission Vice Chairman Neelie Kroes, who has expressed her favour for the development of next-generation networks. Kroes's stance has been welcomed by Vice Minister of Economic Development Antonio Catricalà: "It could have a relevant impact on the spin-off". In addition, on the basis of EU advice, Catricalà requested that AGCOM confirm whether the specifications of Telecom Italia's spin-off meet the precise requirements regarding next-generation networks. However, Bernabè emphasised that the network spin-off project makes reference to a European framework, adding:
"The division of the Telecom network is an appropriate, brave and farsighted choice that will create value for the company and its shareholders and that, on the basis of an evolution of the regulatory framework consistent with the new community guidelines, will allow to remarkably speed up the technological development of our country, with huge benefits for consumers and enterprises."
Progress is thus underway, and the Italian telecommunications framework may soon change significantly.
For further information on this topic please contact Vittorio Noseda or Carlo Grignani at NCTM Studio Legale Associato by telephone (+39 02 72 5511), fax (+39 02 72 55 1501) or email (firstname.lastname@example.org email@example.com).
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