* Renzi party politician calls for network separation
* Telecom Italia says forcing network spin off is illegal
* Italian newspaper says govt again studying network plan (Recasts, adds Telecom Italia, politicians’ comments)
By Danilo Masoni
MILAN, Oct 16 (Reuters) - Any move to force Telecom Italia to spin off its domestic fixed-line phone network would be illegal, the Italian company said on Thursday, as some local politicians revived the idea in a bid to speed up broadband investment in the country.
The former phone monopoly has been criticised for putting off costly upgrades to its copper network and politicians have been calling off and on for a transfer of the business to a state-controlled entity since 2006.
Under pressure from the previous government and in the face of a takeover approach by Hutchison Whampoa, Telecom Italia started talks with Italy’s Cassa Depositi e Prestiti (CDP) last year to spin off the network and sell a stake in it to the state-backed lender.
But disagreements over who would pick top management positions at the new network company and uncertainty over regulation and the value of the business derailed the discussions.
The idea was revived again on Thursday when a member of the ruling centre-left Democratic Party (PD) of Prime Minister Matteo Renzi called for action to force a network separation.
“Today we’re back to talk about the separation of the fixed network: let’s do it quickly and well,” Cristina Bargero, a PD member of the lower house’s industry committee, said.
La Repubblica newspaper, citing political sources close to Renzi’s government, said on Thursday the government was studying a plan whereby CDP would first take 40 percent in the network company and gradually reach majority ownership over three years.
To do so the government, which has powers to veto major ownership changes in companies operating in strategic sectors such as telecoms, would take advantage of moves currently underway at Telecom Italia.
The group’s core shareholders led by Spain’s Telefonica are exiting their seven-year investment, making the phone company a possible takeover target.
Telecom Italia said on Thursday the network spin-off idea was legally groundless and not part of its own business plan, which instead envisages the sale of its Argentina division and other asset disposals to help to fund investments and cut debt of 27 billion euros (34.6 billion US dollar).
“The dossier does not exist,” Telecom Italia Chairman Giuseppe Recchi told reporters on the margins of an event in Milan. “It’s something I have already heard about four or five times since I arrived in Telecom and there is no legal basis for (forcing) a spin off of the network of a private company.”
Besides legal questions raised by such a coercive move, the separation of the network would in any case be a complicated deal since it would involve an asset worth up to 15 billion euros and 20,000 workers.
Supporters of the spin off believe the entry of cash-rich CDP in the network company could help increase investments in a country which lags Europe in terms of broadband penetration.
Italy’s communications ministry did not respond to requests for comment. (1 US dollar = 0.7801 euro) (Additional reporting by Andrea Mandala and Alberto Sisto. Editing by Jane Merriman)