Major shareholder pressures Telecom Italia to spin off wireline network

Declining earnings and revenues plague the debt-ridden carrier
Tools

Italy's struggling national carrier Telecom Italia is being urged by a major shareholder to spin off its fixed-line access network.

"The time is ripe to go ahead with the spinoff. This opportunity should not be wasted as the right conditions may be now, in the next two or three months, or never," said Marco Fossati, whose family's Findim Group SA owns about 5 percent of the carrier, in an interview with Bloomberg Businessweek.

Fossati said the fixed-line access network could be worth between €13 billion ($16.8 billion) and €15 billion ($19.4 billion).

The spinoff of its fixed-line network would help Telecom Italia with its debt, which totals more than €30 billion ($39 billion). The carrier wants to reduce its debt to €27.5 billion ($35.6 billion) by the end of the year.

In addition to its debt troubles, the company has been facing declining earnings and revenues. Last month, the carrier reported first-half earnings declined 1.6 percent, domestic fixed-line revenue dropped 2.9 percent, and domestic mobile sales decreased 3.4 percent.

But it's not all bad news for the Italian carrier. In a recent case study, Forrester noted that Telecom Italia launched a successful social intelligence command center for "collecting, analyzing, and acting on social media conversations." The carrier used the right employees to manage social media and focused on clear business purposes, according to study author Zach Hofer-Shall.

In addition, the carrier signed an agreement this month with Fastweb SpA, which is controlled by Swisscom AG, to build a high-speed next-generation broadband network in Italy. The network will be based on a fiber-to-the-cabinet (FTTCab) architecture, which runs fiber cable to a street-level cabinet and then connects to the office or home via copper wire.

What does the future hold for Telecom Italia? If the carrier can continue to reduce its debt while focusing on core telecom businesses, it should bounce back in the coming years.

For more:
- see the Bloomberg Businessweek article
- see the Forrester case study

Related Articles
Telecom Italia gives more thought to spinning off wireless network
FastWeb, Telecom Italia strike fiber network alliance