UPDATE 2-Telecom Italia puts off network decision to May 30

Thu May 23, 2013 2:13pm EDT

* Group continues to examine spin-off project

* Telecom Italia puts value of network at 13-15 bln euros

* Spin-off could take 18 months - source

* Italian government wants to safeguard network, jobs (Adds Telecom Italia delaying decision to May 30)

By Danilo Masoni

MILAN, May 23 (Reuters) - Telecom Italia has pushed to the end of the month a decision on whether to spin off its fixed-line access network, which is proving more complex than expected due to political and regulatory considerations.

In a statement issued after a board meeting on Thursday, Italy's biggest phone operator said it would continue to examine the feasibility of the spin-off. Its board planned to reconvene on May 30 "to take a final decision," the group added.

Debt-laden Telecom Italia management is pushing for a separation of the valuable copper network, hoping the move can help it raise cash and cut debt. Chairman Franco Bernabe had hoped to reach a decision at Thursday's board meeting.

"The board simply needs more time to examine all the angles," a source close to the matter told Reuters.

The company is also evaluating a possible tie-up with the Italian mobile business of Hong Kong-based conglomerate Hutchison Whampoa, which is targeting a controlling stake in the Italian operator.

Telecom Italia puts the enterprise value (equity plus debt) of its fixed-line network at 13-15 billion euros ($16.7-$19.3 billion), a source with direct knowledge of the matter said.

If approved, the spin-off could take up to 18 months to be completed, the source added.

Telecom Italia's fixed-line network is a profitable asset that brings the group a steady cash flow since competitors have to pay for access.

It is also a vital national asset as whoever controls it can rule over telecommunications connecting banks, government agencies, companies and homes throughout Italy.

THREAT

Some Italian politicians consider Hutchison's bid a threat to national security should the Asian operator end up with control over Italy's main communications network.

"The network is an asset that is strategic for the security, growth and competitiveness of the whole county," Industry Minister Flavio Zanonato said on Wednesday.

Shares in Telecom Italia closed down 1.6 percent. Earlier on Thursday Standard & Poor's cut the group's rating to BBB- in light of its 28 billion euro debt pile and tough economic conditions in its home market.

Any separation of the fixed-line network could pave the way for state-owned fund Cassa Depositi e Prestiti (CDP) to buy a stake in the new network company, helping to ease political concerns of the business falling into foreign hands.

Crucial to any decision on the matter, however, is the position of Telecom Italia's biggest shareholder Telco, which controls 22.4 percent of the operator.

Telco is in turn controlled by Spanish telecoms operator Telefonica, Italian banks IntesaSanpaolo and Mediobanca and Italian insurer Generali.

Telecom Italia also wants to secure a better regulatory environment for itself before going ahead with the project. The changes it is seeking could upset its rivals such as Vodafone Fastweb and Wind.

($1 = 0.7766 euros) (Additional reporting by Stephen Jewkes; Writing by Lisa Jucca; Editing by David Goodman and Mark Potter)

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