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Italy pulls the plug on Telecom Italia’s national fibre network project

New York/Rome — Italian Prime Minister Mario Draghi has abandoned a project backed by his predecessor to create a single national fibre network controlled by Telecom Italia, in a bid to boost competition among carriers and employ a wider set of technologies including 5G services.

The government’s project to improve the country’s digital services will be structured around competitive tenders in multiple areas and will be designed to grant wholesale access to third parties, a senior government official said.

Italy’s recovery plan earmarks €6.7bn to boost investment in ultrawide broadband to achieve universal coverage across the entire country, the official said.

After an EU request for the government to foster competition as it allocates funds from the bloc’s recovery plan, Rome will no longer support Telecom Italia’s plan to combine its landline assets with networks run by state-owned rival Open Fiber, according to people familiar with the matter. The Telecom Italia proposal would have kept the combined new operator under the former monopolist’s control.

The Draghi government is intent on halting any project that would reverse two decades of deregulation and in effect allow Telecom Italia to kill off a competitor, albeit one under state control, the people said, asking not to be named discussing confidential deliberations. The government’s plan would represent opposition to a return to a monopoly in the phone industry, they said.

Telecom Italia shares tumbled as much as 9.2%, and traded down 6.3% at 1.52pm in Milan. The government coming out against the network plan would significantly damage hopes for a merger of the company’s FiberCop network with Open Fiber, Berenberg analyst Carl Murdock-Smith wrote in a note.

Documentation on the recovery plan sent by Draghi’s government to the EU backs the Italian position, daily La Repubblica reported on Thursday.

Innovation minister Vittorio Colao, a former CEO at wireless carrier Vodafone, told Repubblica recently the government is committed to assuring “equity of access to fast internet connections and fair and open competition”. The state should be “an arbiter rather than a player” in the process, he said.

Technology-neutral approach

The government aims to adopt a technology-neutral approach, encompassing fibre deployment as well as fixed wireless access and 5G, the government official said, asking not to be named discussing confidential matters.

Italy has also moved to tighten its grip on Open Fiber, originally a joint venture between Enel, the country’s biggest utility, and state-backed lender Cassa Depositi e Prestiti. Cassa Depositi last week gained control of Open Fiber by buying an additional 10% from Enel, and now plans to accelerate its fibre rollout and inject about €250m into the company through a capital increase, according to people familiar with the matter.

Representatives for the government, Telecom Italia and Open Fiber declined to comment for this story.

Rural areas

Under the revised plan Open Fiber would accelerate its internet services rollout in rural areas, with the government encouraging competition for services in urban regions. Rome would also look to foster coinvestment projects relying not just on fibre but also on ultra-fast mobile services such as 5G, the people said.

The government acknowledged recently that Italy lags behind European peers in “digital adoption and technological innovation”, particularly in rural areas, while the country ranks near the bottom among EU states in adopting new technologies.

“To boost the country’s broadband rollout, the European Commission could leverage on wholesale-only carriers such as Open Fiber or Telecom Italia’s FiberCop, as they provide ultrabroadband services for all players granting equal access,” said Laura Rovizzi, CEO at Open Gate Italia, a Rome-based strategy and regulation consultant that specialises in telecommunications. A clear commitment to an open playing field for digital services could ease access to recovery plan funds, she said.

Telecom Italia CEO Luigi Gubitosi, with the backing of the previous government led by Giuseppe Conte, had pushed for an Open Fiber deal for months, insisting his company would not cede control of the proposed merged network.

That plan was the result of long negotiations between the Conte government, Telecom Italia and Cassa Depositi, which owns nearly 10% of Telecom Italia and about half of Open Fiber. Conte resigned in late January and was replaced by Draghi the next month.

Telecom Italia last year agreed to sell 37.5% of its landline cables running from the street to premises — the so-called secondary network — to the infrastructure unit of investment firm KKR & Co for €1.8bn. Swisscom’s Fastweb will hold 4.5% of the new network company, dubbed FiberCop, which will be a direct competitor of Open Fiber.

Bloomberg News. For more articles like this, please visit bloomberg.com

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