Telecom Italia has Yet Another Setback; Gets Sued for $1.3 Billion

Jacob Harper  |

Telecom Italia SpA (TI) has gone from near bankruptcy to ten percent intraday rises, to nearly being downgraded to junk status, all in one summer. And though the former state monopoly-turned public company has always survived, the newest chapter in its rocky history could signal the beginning of the end of Italy’s largest telecom company.

On Aug 5 competitor Vodafone (VOD) sued Telecom Italia for $1.3 billion, alleging they abused their position atop the Italian telecom market. Telecom Italia already carries $37.5 billion in debt, and is not in an optimal position to weather such a gargantuan setllement.

The summer of 2013 has been a wild ride for the Milan-based telecom company On July 23, scuttled merger plans with Hutchison Wampoa Ltd. (HUWHY) sent Telecom Italia’s stock reeling, and put the future of the company in jeopardy.  

Then their fortune changed for the better. On July 23 the company seemed to have achieved their biggest win in years following a favorable ruling by Italy’s telecommunications regulators. The ruling paved the way for Telecom Italia to spin off its long-suffering wireline division. Telecom Italia's stock in turn spiked nearly 9 percent.

But with the new antitrust allegations of Vodafone, the future of the company again looks dire. Telecom Italia has previously gotten in trouble for violating anti-monopoly regulations, and was fined $104 million euros ($135 million US) in May for abusing its dominant position in Italy’s wireless market.

Vodafone Italy, the division spearheading the lawsuit and the second-largest telecom company in the Southern European country, alleges that Telecom Italia “committed a series of abuses between 2008 and 2013 with the intention and effect of impeding growth in competition in the Italian fixed-line market.” Specifically, they allege Telecom Italia forced them to pay artificially high prices to compete, and that allowing them to spin off their wireline division gives them an unfair edge. Telecom Italia is going forward with their plans to spin-off their legacy copper line sector.

Vodafone Italy is the second largest telecom company in Italy. The company is partly owned by Verizon Communications Inc ($VZ), who have a 23 percent stake in the company.

Telecom Italia reported a net loss of 1.41 billion euros ($1.83 billion US) in the first half of 2013. The company has written down $18 billion since 2011, and looks to have its ninth straight year of declining stock value. Their stock was down 2.15 percent on Monday to hit $6.41

 a share. Telecom Italia is down 29.11 percent on the year.

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