July 24, 2017 / 12:42 PM / 2 years ago

Telecom Italia suspends broadband plan for rural areas: sources

FILE PHOTO: A Telecom Italia tower is pictured in Rome, Italy March 22, 2016. REUTERS/Stefano Rellandini/File Photo

MILAN (Reuters) - Telecom Italia has put its plan to roll out ultrafast broadband in rural areas of Italy on ice, two sources said, suspending a project at the heart of a row with the government that is seen as a reason for the imminent departure of the group’s boss.

Chief Executive Flavio Cattaneo, who is expected to step down this week, has been at loggerheads with Italy’s government for weeks over the group’s plans to roll out superfast Internet in so-called non-economically viable areas - a project dubbed Cassiopea.

It is the deteriorating relationship with Rome that other sources have said led to clashes between Cattaneo and Telecom Italia’s (TIM) top shareholder Vivendi and ultimately prompted the manager’s early exit.

“Cassiopea has been put on ice,” one of the sources said.

A second source said TIM had told Italy’s antitrust watchdog that the connections so far installed in those areas had not been activated and no other work was being planned for now.

TIM initially said it would not roll out broadband in areas where it could not guarantee a return on its investment, forcing Rome to step in with state subsidized tenders.

But in March TIM said it would invest its own money in some of those areas, arguing the market had changed. This shift angered Rome, which claimed it undermined the state tenders.

TIM’s change of heart came after the phone group lost out in the first of the tenders to Open Fiber, a broadband unit set up by power utility Enel which the state drafted in to help after claiming TIM was dragging its feet.

Reporting by Stefano Rebaudo, writing by Agnieszka Flak; editing by Stephen Jewkes

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