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

Two months ago, Telecom Italia SpA Chief Executive Officer Franco Bernabe had a plan to revive the phone company. He started an in-depth review of a wireless merger with Hutchison Whampoa and the board approved a proposal to spin off the fixed-line business. 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. 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 20,000 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.