Bloomberg News

Regulator Orders Telecom Italia to Cut Grid-Access Fee

July 11, 2013

Telecom Italia Is Said to Face About 6% Cut in Grid-Access Fees

Logos for Telecom Italia SpA and the company's mobile unit TIM sit near satellite dishes and radio antennas on a communications tower in Rome. Photographer: Alessia Pierdomenico/Bloomberg

Telecom Italia SpA (TIT) was ordered by the country’s communications regulator to cut what it charges competitors for using its fixed-line grid, costing the carrier 6.5 percent of revenue from that business.

The watchdog known as Agcom met today to review the pricing for renting so-called “last-mile” access to Telecom Italia’s copper-wire network. The Rome-based regulator approved reducing the monthly fee to 8.68 euros ($11.31) from 9.28 euros per line. In a statement, Telecom Italia said the proposal is “completely contrary” to guidelines from the European Commission, and it’s prepared to fight the ruling if enforced.

Italy’s biggest phone company generates about 590 million euros of sales each year from renting “last-mile” access to 5.3 million lines, according to two people familiar with the matter, meaning the reduction would cut the rental revenue by about 38 million euros. Telecom Italia said its own estimated impact is about 110 million euros based on 2012 revenue. Customers include rivals such as VimpelCom Ltd. (VIP:US)’s Wind Telecomunicazioni SpA (WIND) unit and Swisscom AG (SCMN)’s Fastweb SpA.

Bloomberg News reported yesterday that the regulator was going to order the reduction.

Telecom Italia, which is working on spinning off its fixed-line grid, argues that a less rigid regulatory stance is crucial for its success. The company’s directors on May 30 approved the plan to separate the network, setting a precedent for Europe’s indebted phone companies as they look for new ways to raise funds and bargain for lighter regulations.

‘Under Pressure’

“Any reductions of unbundling rates right now, just after the spinoff plan has been presented by the company, could impact the evaluation of the fixed-line network,” said Carlo Alberto Carnevale-Maffe, a professor of business strategy at Milan’s Bocconi University, before the announcement.

Telecom Italia shares closed unchanged in Milan at 52.8 euro cents.

The regulator, under pressure by Telecom Italia’s rivals to reduce network-access costs, has held public hearings on its proposal for a lower monthly rate of between 8.62 euros and 9.25 euros.

European Commissioner Neelie Kroes, in charge of creating a plan to stimulate investment in telecommunications for the European Union’s administrative branch, told the European Parliament this week that she plans to create more consistent ways to access fixed networks as part of her plan to unify the continent’s infrastructure.

Grid Access

Accessing the grid is “too hard, especially across borders,” she said. “Less red tape, less cost, less hassle: that’s what a single market means.”

Likewise, regulators in Europe have slashed the price mobile operators can charge for access to their networks. The maximum mobile-termination rates dropped 74 percent to 0.67 pence per minute in the U.K. between April 2011 and 2013, according to data compiled by Bloomberg. Termination rates in Italy are as high as 0.98 euro cents per minute this month, compared with between 6.6 cents and 9 cents charged in 2011.

Poland, Belgium, Hungary, Spain, France, Germany and Denmark all reduced the upper limit for the mobile charges this year, too. In the U.K., the country’s regulator is proposing to cut the prices BT Group Plc (BT/A) charges for access to its copper network, in order to encourage network investment and ensure broadband is affordable.

To contact the reporter on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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