Italy Seeks to Raise Cash From Frequencies Amid Debt Crisis

Italy, fighting to reduce borrowing costs amid Europe’s debt crisis, may raise more than 2 billion euros ($2.6 billion) from the sale of television frequencies.

Prime Minister Mario Monti’s administration withdrew plans last week to assign six digital frequencies for free after consumer and industry groups called on the government to sell the spectrum to the highest bidders. A sale could bring in about 2.4 billion euros, said Antonio Sassano, a professor of operations research at the University of Rome La Sapienza.

“It doesn’t make any sense to give away for free scarce resources such as frequencies, especially in light of the financial troubles Italy’s in,” Dino Bortolotto, head of Assoprovider, which represents about 200 small and medium-sized telecommunications and Internet companies, said in an interview. The group had filed a complaint to the State Auditor against Italy’s original plan to give away the frequencies for free.

Monti won broad backing Dec. 16 for his 30 billion-euro emergency budget in the Parliament’s lower house, setting up final approval by the Senate this week of his plan to protect Italy from the spread of the euro debt crisis and bring down record borrowing costs. The plan’s measures include an overhaul of the pension system, a new property tax on primary residences and a levy on capital repatriated in tax amnesties.

Make Sacrifices

Fitch Ratings lowered France’s credit outlook and put other euro-area nations on review Dec. 16, saying an overall crisis solution may be “technically and politically beyond reach.” Italy’s benchmark 10-year bond yield returned yesterday above 7 percent, the level that led Greece, Portugal and Ireland to seek bailouts, before falling below the threshold.

“As we ask Italians to make sacrifices, it’s intolerable to think that we can give away a state asset for free,” Economic Development Minister Corrado Passera said in a Dec. 18 interview on state-run RAI television. He didn’t elaborate on whether a bidding process will be used, saying “it may even be a different thing, we have to find new ways” to assign the frequencies.

An auction “could be a Big Bang for Italy’s TV industry and finally open it up to real competition,” Tommaso Valletti, a professor of economics at London’s Imperial College, said.

‘Degree of Unfairness’

Italy raised 3.95 billion euros in September by selling frequencies for so-called long-term evolution, or LTE technology. Valletti said that too many frequencies have been allotted to TV broadcasters compared with other uses such as mobile broadband. Options being considered by the government include reducing the frequencies to be assigned to broadcasters and increasing those for mobile phone companies looking for more spectrum, daily la Repubblica reported yesterday.

Former Prime Minister Silvio Berlusconi originally planned to stage a so-called beauty contest aimed at boosting competition in a country where the free-to-air TV market has few players. RAI and Mediaset SpA (MS), the broadcaster controlled by Berlusconi, got about 80 percent of the advertising spending on TV in 2010, according to the communications regulator.

The beauty contest rules allowed the spectrum to be awarded for 20 years and companies would have had the option to sell it after five years, said Sassano, the Rome University professor.

“Twenty years is far too long with the pace of technological innovation and it’s unthinkable that broadcasters who got the frequencies for free may sell them at a high price after a few years.”

Mediaset rose 0.9 percent to 1.995 euros as of 9:21 a.m. in Milan trading, giving it a market value of 2.36 billion euros. The stock fell 3.2 percent yesterday after the government backtracked on its plan to give away the frequencies.

‘Constructive Debate’

Rupert Murdoch’s satellite broadcaster Sky Italia Srl last month said it was withdrawing from the frequency contest, citing the excessive length of the process, the uncertain timing and “controversial” elements in the regulation which “clearly favor” operators already in the market. Sky Italia CEO Andrea Zappia said at the time that he hoped the decision would “provide the impetus for an open and constructive debate” on the future of TV in the country.

Telecom Italia SpA (TIT) Chairman Franco Bernabe said that if there were an auction for the TV frequencies, it would “be deserted.” The country’s biggest phone company controls Telecom Italia Media SpA (TME), which owns the La7 TV channel. Mediaset will “probably not make any offer because the costs for the few remaining frequencies are high,” Berlusconi said last week. A Mediaset spokeswoman declined to comment.

“If no one is ready to pay for the spectrum, let’s give free access to everyone who needs it, not just a few privileged ones,” Assoprovider’s Bortolotto said.

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Craig Stirling at cstirling1@bloomberg.net;

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