November 16, 2018 / 1:33 PM / a month ago

UPDATE 1-Italy to offer regulated returns for single broadband company - draft

(Adds details, background)

By Giuseppe Fonte

ROME, Nov 16 (Reuters) - Italy is set to introduce measures to help create a single broadband infrastructure company that could combine the networks of Telecom Italia (TIM) and smaller rival Open Fiber, according to a document seen by Reuters.

The measures, contained in a draft amendment to a government fiscal decree, envisage creating a wholesale-only firm with a regulated asset base (RAB) offering tariffs that would be based on the amount of investment made, the draft said.

It said it would be up to sector watchdog AGCOM to work out the regulatory framework.

Italy’s state-controlled energy grids Snam and Terna are both regulated by RAB systems guaranteeing set returns on investments.

The populist 5-Star Movement, which took office with ruling coalition partner the League in June, has placed the creation of a fast broadband network at the heart of its industrial policy.

Open Fiber, controlled by state lender CDP and utility Enel , was enlisted two years ago to build a fast fibre network after Rome accused TIM of acting too slowly to upgrade its ageing copper network.

The draft amendment seen on Friday said TIM had the only network with a countrywide reach connecting over 90 percent of retail users.

“TIM therefore has no particular incentives for investing to rapidly deploy ultrafast broadband technology on a nationwide scale,” it said.

The creation of a single network company would have to be on a consensual basis, the draft said. TIM’s biggest shareholder Vivendi would have to agree to any inclusion of its network.

Telecom Italia is currently caught up in a boardroom battle for control between Vivendi and activist fund Elliott which earlier this year wrested control from the French media giant.

On Tuesday, TIM sacked Chief Executive Amos Genish who had said he supported the idea of a merger with Open Fiber provided TIM was in control of the combined network.

CDP, which holds nearly 5 percent of TIM, controls gas group Snam and power grid Terna.

A source close to the matter said on Friday the creation of a single broadband infrastructure company with regulated returns would make it appetising for long-term investors like CDP. (Reporting by Giuseppe Fonte Writing by Stephen Jewkes Editing by Edmund Blair)

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