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Telecom Italia wants favorable regulation to go ahead with spinoff

A man uses a Telecom Italia phone booth at a bus stop in Rome December 3, 2008. REUTERS/Chris Helgren
A man uses a Telecom Italia phone booth at a bus stop in Rome December 3, 2008. REUTERS/Chris Helgren

MILAN (Reuters) - Telecom Italia said on Monday it wanted to secure favorable regulatory conditions before taking any steps forward in its plan to spin off its fixed-line network after the local regulator cut tariffs its rivals pay to access the grid.

"The company's board acknowledged that the uncertainties introduced by recent decisions taken by AGCOM might affect the feasibility" of the spinoff, the Italian phone company said in a statement late on Monday following an extraordinary board meeting.

Telecommunications regulator AGCOM on Thursday tentatively approved lower fees for rivals who rent space on Telecom Italia's fixed-line copper network, sparking criticism from Telecom Italia, but plaudits from competitors like Vodafone which does not own fixed lines.

Telecom Italia was pondering its options, including whether to halt the spinoff, a source familiar with the matter told Reuters on Monday.

A failure for the project would be another setback for Chairman Franco Bernabe's efforts to revive the debt-laden group, following the collapse earlier this month of tie-up talks with Hutchison Whampoa.

Telecom Italia's board in May approved a plan to separate fixed-line access assets into a new company, a move that could free up resources to cut its more than 28 billion euros ($36.5 billion) of debt.

The project would take several months to complete, the company said at the time.

Telecom Italia has said the fee cut decided by the AGCOM jeopardizes the planned spinoff of the network and would reduce its annual income by 110 million euros.

AGCOM plans to reduce the local loop unbundling (LLU) fees by 6.5 percent to 8.68 euros ahead of a broader regulatory review for the three years to 2016.

The ruling will be reviewed by European authorities and AGCOM will take a final decision well before the end of the year.

Lower line rental charges would diminish the value of the Telecom Italia's fixed network, making the new company to be spun off potentially less attractive to outside investors.

Italy's state-backed investment arm, the CDP, has been in talks with Telecom Italia for months over taking a stake in the network company.

(Reporting by Francesca Landini, editing by G Crosse)

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