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Share Price: 76.40
Bid: 76.38
Ask: 76.42
Change: 3.12 (4.26%)
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Open: 73.02
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Italy's digital future seen at stake in battle for Metroweb

Thu, 18th Dec 2014 15:47

* Metroweb seen becoming central to government's digitalplan

* Telecom Italia, Vodafone make takeover approach for firm

* Renzi eyes 12 bln-euro broadband investment for Italy

By Danilo Masoni and Stefano Rebaudo

MILAN, Dec 18 (Reuters) - A small company renting outoptical fibre cables in Milan has become the subject of a fiercetakeover battle between Telecom Italia and globalmobile giant Vodafone, with a national high-speed fibrenetwork seen as the ultimate prize.

Both companies have set their sights on buying a controllingstake in Metroweb that infrastructure fund F2i is selling.

But what should have been a straightforward deal has turnedinto a full-blown political and regulatory row as deciding onthe buyer of the stake could determine who calls the shots in amulti-billion-euro plan to build the nationwide fibre network.

When Telecom Italia said last month that it was seeking tobuy Metroweb lawmakers from across the political spectrum voicedconcerns for competition. Vodafone then waded in, protesting toItaly's competition watchdog AGCM.

Metroweb generates sales of just 60 million euros ($74million) a year but what is at stake goes beyond mere numbers asplayers jostle for market position in a country that is aEuropean laggard for fast internet access.

Prime Minister Matteo Renzi has pledged 6 billion euros inpublic funds to cover half the costs of an ambitious plan tobring super-fast internet services to 85 percent of Italy'sconsumers in the next six years.

Italy is split by two mountain chains and servicinghouseholds with fibre optic cable is a tough and costly taskthat has been put off for years.

But the pressing need to modernise the country and shake offits economic malaise has changed the landscape. And Metroweb, apartly state-owned company created 17 years ago, is now seen asthe right corporate vehicle for realising Renzi's project.

"Metroweb is the ideal candidate to roll out a new networkof fibre optic cables across Italy," its chief executive,Alberto Trondoli, said.

"We can easily replicate what we've already done in Milan ona national scale, giving all players access on equal terms".

For Renzi, making Italy more digital has turned into a toppriority and the 39-year-old premier is now seeking to poolpublic funds with money from telecoms operators.

Metroweb is part-owned by cash-rich state lender CassaDepositi e Prestiti but CDP's last 4.5 billion-euro nationwidebroadband plan never really got off the ground due to lukewarmpolitical backing.

In recent months the government has changed gear, puttingcontracts out to tender to roll out fibre by tapping intolong-neglected European funds and last month it published agame-changing plan for Italy's digital development.

"The market is waking up to the fact that the government istaking all this very seriously," said Stefano Pileri, the formerhead of technology at Telecom Italia and now CEO of telecomsequipment supplier Italtel.

While Rome's plan spells out which technology should be usedfor Italy's digital development, plumping for architecturealready adopted by Metroweb, it has also indicated that therewards for new investments in fibre may be generous.

This would mark a departure for telecoms regulation, whichcurrently champions competition and low consumer prices to thedetriment of investments, with the change in attitude makingMetroweb all the more attractive.

As a result analysts now value the firm at around 400million euros. ($1 = 0.8139 euros) (Editing by Greg Mahlich)

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