Telecom Italia right to spin off fixed assets

Telecom Italia’s decision to spin off its fixed line assets into a new company will boost its competitive and financial positions, a leading analyst says.
 
The Italian incumbent revealed the plan to separate its access network into a separate company last week. The new firm will handle the upkeep and upgrades of copper and fiber networks, and control active components of the latter including optical line termination and cabinets.
 
A statement by the telco also promises the new company will offer equal access to all firms seeking to use the network.
 
Ovum regulation analyst, Luca Schiavoni, notes the spin off has been in the cards for several years, and offers several benefits to Telecom Italia. “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.
 
“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.”
 
Schiavoni says the separation is also good news for Telecom Italia’s competitors, noting the Equivalence of Inputs model proposed by the telco “has arguable worked very well in the UK with Openreach, the functionally separated arm of BT.”
 
Telecom Italia plans to invest €10 billion in the new company’s fiber network over the next decade, with funding provided by the spin off and investors, Bloomberg reports.
 
The telco’s board is also considering a tie-up with 3 Italia parent Hutchison Whampoa, as it seeks to bounce back from a run of poor results. Net income in the first quarter fell €241 million year-on-year to €364 million, EBITDA 10.1% to €2.6 billion.

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