Telecom Italia Said to Weigh Revamp as $4 Billion Costs Loom

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Telecom Italia SpA is considering a reorganization of the business that leases its landline network to rivals to avoid as much as 4 billion euros ($4.4 billion) in possible antitrust fines and damages, according to people familiar with the matter.

The plan would involve folding the OpenAccess unit, which guarantees so-called equality of access to rivals, into the wholesale business, creating an entity similar to BT Group Plc’s Openreach, said the people, asking not to be identified because the deliberations are confidential. The board is set to review the proposal when it meets Aug. 6 to discuss second-quarter earnings, the people said.

Telecom Italia’s results will include a provision to reflect those antitrust concerns, said one of the people. One-time items of 309 million euros are included in analysts’ estimates posted on the company’s website.

A spokesman for Milan-based Telecom Italia declined to comment on the reorganization plans or quarterly earnings.

Telecom Italia shares declined as much as 1.5 percent and traded 1.1 percent lower at 1.22 euros as of 9:08 a.m in Milan. They are the biggest decliners in Italy’s 40-company FTSE MIB Index, which was up 0.5 percent.

Telecoms Liberalization

Decades after European countries opened up their domestic telecommunications markets to competition, former monopolies such as Telecom Italia and BT continue to be criticized for taking too long or failing to provide access to competitors. Britain’s telecommunications watchdog is reviewing a possible breakup of BT by forcing it to separate its Openreach division.

Vodafone Group Plc and Fastweb SpA are among companies that leases Telecom Italia’s landline grid, the biggest in the country. Vodafone is seeking more than 1 billion euros in damages, claiming Telecom Italia is abusing its dominant position. Other claimants include Fastweb, which is seeking 1.7 billion euros.

In total, claims against Telecom Italia amount to about 4 billion euros, according to the local competition authority. The watchdog said in a public newsletter on Monday that the former monopoly had abused its market position.

Representatives for Vodafone, Fastweb and the competition authority declined to comment.

Telecom Italia’s wholesale unit offers voice, broadband and data services to competitors. In the proposed model, Telecom Italia would have to buy wholesale capacity from OpenAccess, just as rivals do, according to two of the people. According to the plan, the wholesale division would oversee all OpenAccess operations, one of the people said.

In May, Italy’s Council of State confirmed a 104 million-euro antitrust fine against Telecom Italia, paving the way for a new round of potential antitrust and civil litigation.

The carrier posted its first annual profit since 2010 last year as Chief Executive Officer Marco Patuano focuses on more-lucrative faster broadband services and reduced debt.

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