June 20, 2018 / 1:31 PM / a month ago

Telecom Italia keen to discuss fiber-to-the-home tie-up with Open Fiber

MILAN (Reuters) - Telecom Italia (TIM) is keen to discuss combining the Italian phone group’s fiber-to-the-home (FTTH) broadband assets with those of smaller rival Open Fiber, Chief Executive Amos Genish said on Wednesday.

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

In a briefing, Genish said he saw clear economic benefits of such a tie-up, especially given the long timeframe for recouping the costs of multibillion euro investments to bring ultrafast internet to homes in Italy, where demand for speeds of up to 1 gigabyte per second is still very low.

“We are more than open ... to participate in a dialogue on such a combination,” Genish said.

A source familiar with the matter later added that TIM had spoken about the idea to the shareholders of Open Fiber, which is jointly owned by state lender Cassa Depositi e Prestiti (CDP) and state-controlled utility Enel.

The source said the next move in any tie-up depended on CDP’s new management, due to be reshuffled following a recent change of government in Italy, coming on board.

“The ball is in Open Fiber’s court, we are willing to sit down with them,” the source said.

Open Fiber said it was “open to cooperate with anyone who can add value to its fiber optic investments”.

TIM’s idea is that the combined FTTH entity could gain a regulated asset base (RAB) status, the person added. A RAB-based scheme allows operators to get regulated returns on investments they make in the infrastructure on top of fixed tariffs.

TIM is not interested in combining its entire network infrastructure with Open Fiber, partly because the chance of that larger entity getting RAB status is very low, the source said.

TIM is in the process of putting its network infrastructure into a legally separate company (NetCo) fully controlled by TIM. Next year, the group will evaluate further options for NetCo, including a potential stake sale and listing, the source said.

Genish, who took over at Italy’s biggest phone group last year, also said a three-year business plan presented in March was proceeding well and he was encouraged by the feedback he had received from credit rating agencies.

He said he expected TIM to return to an investment grade rating next year, which would pave the way for the former state monopoly to resume dividends payments, last handed out in 2012.

Genish said he was committed to TIM and to its strategy to 2020, dismissing suggestions he could leave early following a reshuffle after activist fund Elliott wrestled board control from top shareholder Vivendi.

However, the Israeli-born executive said there were some individual members on the board who were “feeding untrue, unreliable, speculation” behind the scenes, interfering with every day management. He did not give details.

After its boardroom coup last month, Elliott appointed 10 independent directors - or two-thirds of seats - to TIM’s board.

Genish said all those members needed to act in accordance with their mandate of being independent and non-executive.

He added the disruption neither impacted his nor the management’s commitment to delivering on the new strategy plan.

Commenting on the launch in Italy of new mobile rival Iliad last month, Genish said the French telecom operator’s low-priced offer was “aggressive”, but “not disruptive”, and TIM’s position remained solid.

He added TIM was seeking clarity from authorities on whether Iliad’s move to sell SIM cards via automatic sales machines violated a law that requires the identity of a person buying a SIM card to be verified by an authorized official.

If the practice is deemed legal, TIM would probably adopt the same method to cut costs, he said.

Additional reporting by Stephen Jewkes; Editing by Mark Potter

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