Italy set to axe single network plan

The Italian government is reportedly on the verge of pulling the plug on a plan to create a single fixed-line network due to fears over creating a new telecoms monopoly in the country.

Mary Lennighan

May 7, 2021

3 Min Read
Italy smartphone

The Italian government is reportedly on the verge of pulling the plug on a plan to create a single fixed-line network due to fears over creating a new telecoms monopoly in the country.

There have been media rumblings to that effect for a few weeks and on Thursday Bloomberg reported that Italian Prime Minister Mario Draghi plans to can the single network plan on competition grounds, citing the usual unnamed sources familiar with the matter.

For industry watchers this is a staggering development, not because the single network plan was actually quite a good idea from a competition point of view – it wasn’t – but because it beggars belief that it got this far in the first place. It’s actually quite shocking that Italy’s previous administration – Draghi took over as PM from Giuseppe Conte earlier this year – was so set on merging the country’s two dominant fibre assets.

How was that ever going to be competitive when one of the two, the national telecoms incumbent, had apparently brokered a deal to ensure it had majority control of the merged asset, and would also serve as a retail provider on the network? Sure, there could be checks and balances in place, but the proposed single entity never really had the hallmark of a truly independent wholesale infrastructure provider.

To recap, TIM is in the process of wrapping its access network into the new FiberCop business, which it will control with a 58% stake, having agreed to offload 37.5% to investment firm KKR and 4.5% to Fastweb, in return for contributing its share of the Flash Fiber FTTH joint venture between itself and TIM.

The creation of FiberCop is on paper unaffected by any government manoeuvres. However, it was widely viewed as a precursor to the establishment of the single network, which would have seen FiberCop merged with Open Fiber, the alternative fibre wholesaler set up by state-owned lender Cassa Depositi e Prestiti (CDP) and utility company Enel five years ago. Enel’s continued involvement in Open Fiber was proving something of a sticking point; the utility wanted an out, but took its time in brokering an exit deal. However, last week Enel finally announced it had agreed to sell its 50% holding in Open Fiber for €2.65 billion, with Macquarie taking 40% and CDP Equity 10%.

It seems the deal is no longer relevant, in the context of the single network at least. The Italian government is under pressure from Brussels to foster competition in the telecoms market as it allocates EU funding as part of a Covid recovery plan, much of which will be ploughed into digital infrastructure. As such, the Draghi government will not support a single network scheme that would allow TIM to swallow up a major competitor, Bloomberg noted.

Instead, Rome reportedly has a new plan, that would see Open Fiber push on with its network roll out in rural areas, while the government would encourage competition in urban areas, the newswire said. It will also looks to promote cross-investment projects in both the fibre and 5G markets.

TIM is no stranger to the idea of shared investment, having called on would-investors to share the cost burden of FTTH rollout – via FiberCop – a couple of months ago.

That type of open investment model is a far cry from a world in which the incumbent gets to hoover up all alternative network assets and is backed by the state to do so. Admittedly, FiberCop is being set up as a wholesaler, separate from TIM’s retail business, but nonetheless, it was a questionable plan and one that is probably better off consigned to the annals of history.

About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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