ROME/MILAN Italy's telecoms regulator is likely to tell Telecom Italia (TLIT.MI) on Thursday it can go ahead with a spin-off of its fixed-line network, two sources with knowledge of the process said, easing concerns the project could be scrapped.
Separating the fixed-line business would allow Italy's biggest phone company to sell a minority stake in the operation and pay off some of its debts.
Telecom Italia put the project on hold last week after the regulator, AGCOM, approved lower fees for rivals to rent space on the fixed-line network.
Telecom Italia said the prospect of smaller fee income threw the feasibility of the spin-off into doubt. Its shares reached a record low after the decision.
But on Monday, Telecom Italia Chairman Franco Bernabe said his group would have enough information by the end of July to confirm a decision to move forward with the plan - comments that suggested it was back on track.
"The authority will say that the planned spin-off of the network is a serious plan, ending the preliminary phase of analysis," said one of the sources.
Shares in Telecom Italia were up 6.2 percent by 1449 GMT on Tuesday, outperforming its European industry peers.
Analysts at brokerage Icbpi said in a note that the ultimate success of the plan still depended on AGCOM devising a new regulatory framework.
Selling the fixed-line business would help Telecom Italia cut its net debt of over 28 billion euros ($37 billion).
Bernabe has previously said he expected a deal with AGCOM by early 2014.
Failure would deal another setback for Bernabe's efforts to revive the debt-laden group, following the collapse earlier this month of tie-up talks with Hutchison Whampoa 0013.HK.
Telecom Italia was in talks for months to sell a stake in the network company to state-backed fund Cassa Depositi e Prestiti (CDP), but no deal materialized because of differences over the price and governance issues.
Separately on Tuesday, Italy's competition watchdog said any purchase by CDP of the fixed-line network would have to be reviewed for its effect on competition. ($1 = 0.7580 euros)
(Reporting by Alberto Sisto and Danilo Masoni; editing by Tom Pfeiffer)