Feature Article

June 26, 2012

Telecom Italia Shares Jump 7 Percent on Rumors of Network Split

Telecom Italia is reportedly planning to spin off its fixed-line network, causing shares of the carrier to jump 7 percent on Monday.

Telecom Italia allegedly asked the financing firm Cassa Depositi e Prestiti (CDP) for 3 billion Euros to finance the spin-off company.

The carrier and CDP both denied that it was planning the move, but an anonymous source told Reuters that the time is right if they did do so.

“The time is right. Certainly the price must be negotiated,” the source said.

“The key issue is the valuation of the network, which analysts indicate in a wide range which tops 15 billion Euros," another said.

Even if both entities publicly denied that they planned to split off the wireline network, that didn't stop shares of Telecom Italia from rising 7 percent, trading at 0.72 Euros per share.

If such a split did happen, it would be to improve the country's broadband access – something CDP and Telecom Italia have talked publicly about in the past. Only 49 percent of households in Italy have a broadband connection, compared with an average of 61 percent in Europe.

CDP chairman Franco Bassanini reiterated the company's commitment with Telecom Italia to improve its broadband network earlier in June. Telecom Italia Chief Executive, Mario Patuano, in turn said the company was interested in working with CDP in rolling out “ultra-broadband” across Italy.

Telecom Italia could split off its Open Access Unit, which has the broadband infrastructure and merge it with another company to create the new entity. The Open Access Unit currently employs around 19,000 people.

The company, however, said that whatever happens, it still wants to be in control of its network.

CDP seems committed to expanding broadband access in Italy. It gave 500 million Euros to another broadband project by Metroweb, a rival carrier, bringing fiber access to 30 cities in the country.

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Edited by Braden Becker

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