Telecom Italia Wins Reprieve for Fee-Cut Order
The European Commission told Italy’s telecommunications regulator to suspend an order for Telecom Italia SpA to cut the fees it demands from competitors for using its fixed-line network.
The commission, the European Union’s administrative arm, has frozen the order for as many as three months as it reviews whether Agcom, as the watchdog is known, followed proper procedures when it didn’t prepare a separate market analysis on the potential impact of its July 11 verdict, the Brussels-based commission said yesterday.
The development is a reprieve for Telecom Italia, which under Agcom’s ruling would have to reduce the monthly fee it charges competitors to 8.68 euros ($11.50) from 9.28 euros per access line, or by 110 million euros in annual revenue according to the Milan-based company’s estimates. Telecom Italia has said the order is “completely contrary” to guidelines from the commission.
“In departing from the approach announced last year for setting access prices in the Italian broadband markets, Agcom undermines the required regulatory certainty for all market players,” Neelie Kroes, the European Union commissioner in charge of the digital agenda, said in a statement. “Regulation must aim at creating a level playing field for all operators.”
Telecom Italia shares rose as much as 1.9 percent in Milan yesterday after Bloomberg News reported the commission’s views. The stock closed 0.7 percent higher at 51.6 cents, valuing the former phone monopoly at 9.4 billion euros.
In-Depth Probe
Agcom must now discuss the access-fee proposal with the Body of European Regulators for Electronic Communications as the European Commission begins an so-called Phase 2 in-depth review.
Agcom said in an e-mailed statement it is prepared to work with EU authorities in reviewing the matter. “We reiterate the validity of our proposals, especially for the cut of grid-access fees,” the agency said.
Among companies that pay Telecom Italia for access to its network are Vodafone Group Plc and VimpelCom Ltd.’s Wind unit. Vodafone this month said it’s seeking more than 1 billion euros in damages from Telecom Italia for allegedly abusing its dominant position in the country’s phone market.
Standard & Poor’s yesterday changed its outlook on Telecom Italia’s debt to negative from stable, while confirming its BBB-ranking, the lowest investment grade. All three major rating companies rank the debt one step above junk.
Outlook Cut
A cut by any of them would be the first since ratings started last decade on Telecom Italia’s debt — which at 28.8 billion euros on an adjusted net basis is triple its market value — and would put the carrier in the same league as Portugal Telecom SGPS SA and Greece’s Hellenic Telecommunications Organization SA.
Chief Executive Officer Franco Bernabe said this month, after reporting a first-half net loss because of a 2.2 billion-euro goodwill writedown and cutting Telecom Italia’s full-year revenue forecasts, that a debt-rating downgrade is “one of the possible risks that the company must face.”
Telecom Italia is among European carriers hurt most by the region’s debt crisis as consumers cut spending. While Vodafone has businesses in the U.S. and emerging markets such as India to offset revenue declines in southern Europe, and as Telefonica SA operates in the U.K. and Germany, Telecom Italia generates almost 60 percent of its sales from its home market.
Source:Bloomberg
