Italy Fines Telecom Italia For Abusing Fiber Market Dominance

(Bloomberg) -- Italy's competition authority has decided to fine Telecom Italia SpA around 120 million euros ($134 million) for abusing a dominant position in rural fiber-optic networks, according to people familiar with the matter.

The penalty follows a complaint by rivals including Open Fiber SpA and the Italian units of Vodafone Group Plc and CK Hutchison Holdings Ltd. They accused the former monopoly of gaming the country's rules and regulations to bar potential rivals from the fixed-line wholesale market.

The regulator AGCM carried out an in-depth review following the complaint and has found that Telecom Italia hindered competition in rural areas, said the people, who asked not to be named as the details are not yet public. Telecom Italia has not yet received official notification of the fine, the people added.

Telecom Italia has halted the rural rollout since the regulator began its investigation in 2017. As a result of the ruling, the company's rivals are planning to pursue it for further damages, according to people familiar with those companies' plans.

Representatives for Telecom Italia, Open Fiber shareholder Enel SpA, Vodafone, Hutchison's Italian unit Wind Tre and the AGCM declined to comment.

Antitrust Issues

A new legal battle could delay Telecom Italia's effort to combine its fixed-line business with Open Fiber.

That plan already faces potential competition issues and may require a strong set of remedies, including the sale of a controlling stake in Telecom Italia's network, according to people familiar with the regulator's thinking.

Anticipating this, Telecom Italia has begun a process to spin off part of the network into a new division that's likely to include the copper and fiber lines that run from street cabinets to premises, also known as the secondary network.

Read More: KKR Bids for Telecom Italia Grid Stake as Spinoff Rekindled

Private equity giant KKR & Co. last month bid for a minority stake in the new unit. That may in turn make it easier for Telecom Italia to fund an Open Fiber deal. KKR's approach gives the secondary network an enterprise value of 7.5 billion euros ($8.4 billion).

The plan also has the backing of the Rome government, which favors the creation of a single national network in order to avoid duplication and wasted investment.

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

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net, Thomas Pfeiffer

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