Exclusive: Italy working to create single broadband champion independent of TIM - source

ROME (Reuters) - Italy’s government is studying a plan to create a single ultra-fast broadband network that could initially be majority-owned by phone incumbent Telecom Italia (TIM) but would grant equal access to all market players, a person close to the matter told Reuters.

FILE PHOTO: Telecom Italia logo is seen at the headquarter in Rozzano neighbourhood of Milan, Italy, May 25, 2016. REUTERS/Stefano Rellandini/File Photo/File Photo

Rome is trying to broker a deal between former phone monopoly TIM and Open Fiber, which is controlled by utility Enel and state lender CDP, to merge their fibre assets and create a national champion.

But differences over issues such as governance and regulation have created a deadlock.

TIM, which has both a retail and a wholesale arm, has repeatedly said it wants to keep control of any merged entity with Open Fiber, while European regulations favour the adoption of a non-vertically integrated model outside TIM’s control.

To end the stalemate, Economy Minister Roberto Gualtieri asked TIM and Enel to sign a Memorandum of Understanding (MOU) by the end of July, Reuters exclusively reported on July 11.

Governance of the future single network should be structured to guarantee “its independence from the incumbent”, said the source asking not to be identified because of the sensitivity of the matter.

The source said Rome was drawing on the Openreach model used in the United Kingdom while at the same time keeping network ownership structure open to other operators.

“The next few days will be crucial,” the source said.

Openreach is a wholly-owned subsidiary of BT which runs Britain’s nationwide broadband network as a legally separate entity. BT and rivals such as Sky and TalkTalk use its lines to provide broadband to their customers.

Under the government’s proposal, still to be finalised, other phone operators would be invited to invest in the single grid, the source said, adding TIM was ready to accept such a condition.

Rome stepped up pressure to create a single network after TIM started talks with U.S. private equity fund KKR about selling 40% of its secondary, or last-mile, copper and fibre network, which could become the embryo of a single network.

A second source, also asking not to be named, said a binding offer from KKR could come as early as this week.

The Treasury, TIM, Enel and KKR all declined to comment.

Reporting by Giuseppe Fonte, additional reporting by Elvira Pollina and Stephen Jewkes in Milan, editing by Giselda Vagnoni