Telecom Italia Fixed Line Spinoff On Hold After Regulator Cuts Wholesale Pricing

The Wall Street Journal reports that Telecom Italia(TI) has put its planned spinoff of fixed line assets on hold following a decision by regulator AGCOM to cut the wholesale rates that others firms pay to the fixed line business.

After an extraordinary board meeting, the former state-owned company said the continuation of the project is subject to verification of regulatory aspects. “Before proceeding with further stages of implementation of this plan, the consistency of its content and the regulatory path…must be verified,” it said in a statement.

According to Telecom Italia, Italy’s largest telecommunications operator, AGCOM’s decisions create “uncertainties” that could affect the feasibility of the project.

Last week, AGCOM proposed lowering the rates that alternative operators need to pay Telecom Italia to access its fixed-line network. Telecom Italia responded immediately, saying that the proposal was “clearly in contrast with the European framework” and that it would apply to the courts if the decision was confirmed.

AGCOM’s proposal is now expected to be reviewed by the European Commission, the European Union’s executive arm, before coming into force.

Telecom Italia also said that the cut rate would affect its future investment decisions and have an “economic-financial impact” of around 110 million euros ($143.9 million).

AGCOM insisted that the ruling is for only 2013 and should not impact the spinoff which is not scheduled to take place until next year. This seems like a strange claim, since the margins of the fixed line business in 2013 are clearly material to any decision to spin off the group.

Disclosure: The author holds no position in any stock mentioned