Telecom Italia Goes Back to Square One With Spinoff Plan on Hold

Much of that has unraveled within the past two weeks. The proposed combination with Hutchison’s 3 Italia unit has stalled amid disagreements over price and antitrust concerns. Late yesterday, Telecom Italia put on hold the network separation plan, saying a decision by the country’s communications regulator last week to cut access fees to the Milan-based carrier’s network may “affect its feasibility.”Halting the creation of a new company, with assets valued at about 14 billion euros ($18 billion) and as many as 20,composite resin000 workers -- after the botched linkup with Hong Kong billionaire Li Ka-shing’s Hutchison -- may shift investors’ focus back to a stock that is trading at the lowest level in almost 16 years and a company whose net debt is triple its market value.“Telecom Italia’s heavy debt load, already teetering on the edge of a downgrade to junk, may be pushed over the edge” after its second-quarter earnings report, Robin Bienenstock, an analyst at Sanford C. Bernstein in London, wrote in a report entitled “Telecom Italia: How Much Worse Can It Get? Worse” published yesterday before Telecom Italia announced putting the spinoff plan on hold.The stock closed little changed at 50.tyre changer4 euro cents in Milan yesterday. It dropped 4.7 percent on July 12, the lowest price since August 1997. A day earlier, the Agcom authority cut the price Telecom Italia rivals pay to rent so-called “last-mile” access to its copper network by 6.5 percent. 

Franco Lombardi,carbon sheetsthe head of minority shareholder group Asati, said in a letter to the board yesterday that the slump makes “a significant recovery of the stock, near a record low, improbable and makes Telecom Italia easy prey for non-European operators at a cheap price.”Telecom Italia was betting on using the spinoff to win lighter regulatory scrutiny, allowing the carrier to focus on faster-growing services such as data and wireless. While phone companies have tried separating fixed-line businesses before,tyre equipments fully carving out an access network -- considered strategic by many governments -- would be unseen among European carriers.“Before proceeding with further stages of implementation of this plan, the consistency of its content and the regulatory path with the underlying assumptions of the plan must be verified,” Telecom Italia said in its statement after directors reviewed the project at yesterday’s board meeting.As part of the spinoff proposal, Telecom Italia was in talks to sell a stake in the new company to state-owned lender Cassa Depositi e Prestiti.While Telecom Italia said the effect of the July 11 Agcom ruling would be equivalent to about 110 million euros in annual revenue -- Telecom Italia reported almost 30 billion euros in 2012 sales -- the decision was significant because it’s the first major ruling since the carrier decided to proceed with the spinoff. Telecom Italia has argued that a separation of the assets would help it bargain for lighter Vintage faucets regulations.“A bigger crisis -- more writedowns, a canceled dividend and a ratings downgrade -- are probably necessary before Telecom Italia does something more drastic,” Bernstein’s Bienenstock wrote in the report.