Italy ruling party proposes state role for T.Italia network

By Giselda Vagnoni

ROME (Reuters) - Italy should play a role in resolving the gridlock over Telecom Italia's (TIM) (TLIT.MI) network assets, possibly by involving state lender Cassa Depositi e Prestiti (CDP), the president of the ruling PD party said in a position paper.

Italian politicians have been calling on and off since 2006 for TIM's network to be transferred to a state-controlled entity as Rome considers it a strategic asset that should be a neutral platform open to all phone companies.

The heavily-indebted company has been criticised for putting off costly upgrades to its ageing copper network and is now facing competition from Open Fiber, jointly controlled by utility Enel (ENEI.MI) and CDP.

The network issue returned to the forefront of political debate when French media group Vivendi (VIV.PA) built a 24 percent stake in TIM, becoming its top investor and increasingly calling the shots at Italy's biggest phone group.

In the document published by online magazine Key4Biz, Matteo Orfini said the state needed to push for the creation of a single integrated network company and eliminate infrastructure rivalry which he called "unsustainable in the long term".

"The status quo is not an option," he said.

Listing a series of scenarios to resolve the network tiff, Orfini said a public or private Italian investor could flank Vivendi as a shareholder in TIM, to help sharpen the Italian phone group's business focus.

Orfini, who is a lawmaker in parliament but not a government member, added that CDP could propose to buy part or all of Vivendi's stake in TIM.

Orfini said Vivendi should be given the opportunity to give up control of Italy's biggest phone group and instead focus on its plan to build a European media powerhouse, by involving broadcaster Mediaset (MS.MI), in which it has built a stake of just under 30 percent.

Plans to spin off TIM's network, which according to some estimates could be worth up to 15 billion euros (13.43 billion pounds), have foundered in the past over its valuation and because TIM insisted on hanging onto the business.

Orfini said that while a spin-off might be difficult in the short term, the network could be separated into a regulated newco, fully controlled by TIM but legally distinct.

That move, along with some state participation in TIM, could facilitate a later integration with network rival Open Fiber.

TIM shares rose more than 3 percent after the position paper came out. The stock was up 2.1 percent at 0.77 euros by 1153 GMT.

TIM, which considers its network a strategic asset, declined to comment. Vivendi declined to comment.

(Writing by Agnieszka Flak; Editing by Ken Ferris and Alexander Smith)