The European Union is preparing to oppose the merger of Italy, under the control of Telecom Italia SpA.
The plan is to create a single national broadband network controlled by former monopoly Telecom Italia SpA, according to people familiar with the matter. However, shares have fallen further since June.
EU competition officials led by Margrethe Vestager are concerned that a proposed combination of Telecom Italia's fixed network and that of smaller, state-backed rival Open Fiber SpA would create a monopoly , reversing two decades of deregulation, said the whistleblowers, who asked not to be identified as the discussions are private.
Telecom Italia CEO Luigi Gubitosi has been pushing for an Open Fiber deal for months, and has made it clear that the company will not cede control of the network once it becomes the sole fixed-line broadband provider in Italy. He plans to design a full set of corporate governance solutions to guarantee the rights of minority shareholders, according to Bloomberg.
A Telecom Italia spokesman declined to comment. The European Commission said in an emailed statement that it was “following developments” and declined requests for further comment.
However, EU officials are wary of the company being controlled by only the country's largest communications service provider, the people said. It is common for companies to informally discuss their plans with antitrust officials before any formal notification.
The EU's view will be of great importance, as it could potentially block a deal if it is ever formally agreed, even though both companies are based in Italy. The European Union has refused to allow national authorities to review telecoms deals, even when they are in just one country.
The plan is moving forward after months of discussions between the government, Telecom Italia and state investment body Cassa Depositi e Prestiti SpA – a major shareholder of Telecom Italia that also owns half of Open Fiber.
Telecom Italia has already begun a process to spin off its fixed-line infrastructure to raise much-needed cash. The debt-laden business has shrunk in the face of tough competition and a sluggish Italian economy. Last month, it agreed to sell a 37.5% stake in a new unit that will own the fixed cables that run from streets to homes and businesses — the so-called secondary network — to investment firm KKR & Co. for €1.8 billion.
The new company, FiberCop, will have an initial enterprise value of 7.7 billion euros. Telecom Italia sent a preliminary notification to the EU about the FiberCop plan earlier this month, according to a person familiar with the information.
