TIM looks to Openreach-style separation to appease Gov

Bill Contract Tear

Telecom Italia’s Board of Directors has given the green light to the Vivendi-tinged TIM CEO Amos Genish to start the legal separation of its fixed access network.

The move should come as little surprise to anyone keeping an eye on developments here, as the Italian government has seemingly been quite worried about the influence French media monster Vivendi has over proceedings. The Government has been flexing its muscles in recent months, prying more intently into the business on the grounds it is concerned about investment and management of the fixed network, an asset of national, strategic importance.

Perhaps with this separation Vivendi TIM will be able usher away the inquisitive eyes of the Italian Government, and start running the business the way Vivendi it wants to.

The separation itself sounds very similar to the BT/Openreach saga which plagued the UK telco space for months. The project will create a separate legal entity, which will be known as Netco, which will be 100% controlled by TIM. Netco will own the access network (from the exchange up to customers’ homes) and all the infrastructure (buildings, electronic equipment and IT systems), and will be instructed to provide wholesale services independently.

Whether this satisfies the Italian Government remains to be seen, however it should now only be able to (in theory) interfere with Netco and no longer the media ambitions of TIM. The infrastructure was the concern of the Government and now a ‘neutral’ business, with its own CAPEX budget has been established concerns should be allayed. The Vivendi TIM management team will be responsible for appointing the Netco Board of Directors, so how independent and neutral this business becomes is questionable.

But that is tomorrows problem. Today, Vivendi CEO Arnaud de Puyfontaine will probably be celebrating the withdrawal of the Government’s prodding fingers. The French businessman and of course the TIM management team, who do not bend to the will of Paris at all, can focus on building a media empire to takeover continental Europe.

As mentioned before, appeasing the Government with a separation should not be a surprise. What we are still surprised about is the fact that Vivendi is able to seemingly exert so much control over TIM without being forced to buy the telco.

Looking at the performance of the TIM business over the last 12 months, the noises are certainly positive. Total revenues across the group for the 12 months increased 2.8% to €19.8 billion, while in Italy the number of UBB customers increased by 1.2 million and an additional 2.1 4G subscriptions were acquired. Looking at fibre coverage, this also increased from 60% of the population through to 77% from 2016 to the end of 2017.

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