Telecom Italia row deepens as Prodi aide quits

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The Independent Online

The political storm over the future shape and ownership of Telecom Italia showed no sign of calming yesterday after the resignation of Angelo Rovati, a senior aide to the Prime Minister Romano Prodi, and the man at the centre of the dispute.

His departure followed that of the chairman of TI, Angelo Tronchetti Provera, on Friday. But after more than a week of abuse, claims and counter-claims, the Italian government was still in the thick of its biggest crisis since its election in April.

At the heart of the crisis was the future of TI and its mobile network TIM, the last of Italy's four mobile networks still in Italian hands. For two years, under Mr Provera, TI has been working to integrate its fixed-line and mobile businesses: last year, the company spent more than €26bn (£18bn) buying the 44 per cent of TIM that it did not own. In prospect was the integration of fixed-line and mobile businesses, taking advantage of the booming demand for broadband.

But in a sudden volte-face, Mr Provera announced last week he was looking for buyers for the mobile network, which has been valued at about €35bn. The only reason for selling the network, analysts say, was to solve TI's short-term debt problem, which amounts to more than €40bn.

But the announcement appeared to stun Mr Prodi, who said he knew nothing about it and indicated he thought it was a bad idea. Since the dispute broke, Mr Provera has been criticised by shareholders who point out he has done nothing to reduce the group's massive debts and appeared to have no clear strategic vision of the company's future.

Mr Provera then told the press he had received a 28-page plan from Mr Prodi's aide, Mr Rovati, noting that the company was at risk of a takeover for just €10bn, and suggesting that one way to secure its future would be for the government to take a stake in it again.

Mr Prodi, looking more and more awkward and in China on tour the whole time, said he knew nothing about Mr Rovati's plan, even though it carried the insignia of the Presidente Del Consiglio, the Prime Minister's office. He also rejected opposition calls for a parliamentary debate.

In his resignation letter to Mr Prodi, released yesterday, Mr Rovati, a former basketball star, said: "Following Tronchetti Provera's resignation, and as the government prepares to report to parliament on the national telecommunications system, I believe that it is my duty to quit my assignment as soon as we are back in Italy." He signed the letter: "With love."

Mr Prodi is in difficulties because he is open to accusations that his centre-left government is beginning to flirt with dirigisme, getting involved again in industries from which it has already divested.

Luca Cordero di Montezemolo, president of the employers' organisation Confindustria, told the Corriere della Sera newspaper: "There is a risk of interference by the state." He said "nostalgia, tendencies, dirigiste temptations present in a large slice of the government", adding: "Let's be clear about this. Telecom Italia is a private company listed on the stock exchange, and the state is remunerated for the stock it still holds ... From overseas I get the clear impression that as regards the nation we are talking in terms of taking a nasty step backwards."

But the dilemma for Mr Prodi is that while the possibility of a partial renationalisation provokes the noisy ire of the opposition, as well as of Mr Montezemelo and his friends - Silvio Berlusconi has already demanded Mr Prodi's resignation - the sale of TIM to a foreign buyer would be regarded with deep dismay on both sides of the political divide.

Meanwhile, Mr Provera's successor as the head of TI, Guido Rossi - a veteran fixer who was responsible for its privatisation 10 years ago - has wasted no time in pursuing the strategy focused on fixed-line and internet. On Sunday the company announced it had agreed to buy Time Warner AOL's internet access business in Germany for €675m cash. This followed two deals on content concluded with Rupert Murdoch last week.