Italy wants a stronger national telecoms network, Innovation Minister Vittorio Colao said on Saturday, adding this could be achieved by merging Telecom Italia (TIM) and Open Fiber assets as long as competition in the sector is maintained.

"What we're keen on is a national telecoms infrastructure ensuring great performance and quality," Colao told reporters on the sidelines of the Ambrosetti business forum.

"If this were to happen by combining parts of Telecom (Italia) with Open Fiber, that's welcome as long as competition is preserved," Colao added.

A former head of Britain's Vodafone, Colao said he was worried about the industry in Italy and Europe because return on investments and innovation capacity has dropped in the past few years.

Italy's broadband performance lags that of many of its fellow European Union (EU) countries.

Colao confirmed that Italy, together with Spain and France, has called for the European Commission to come up with legislation that ensures Big Tech firms partly finance telecoms infrastructure in the bloc, as reported by Reuters last month.

INCOMING BID

Consolidation at local level in a fragmented market could be a way to shore up the sector, but this needs to happen while safeguarding competition, Colao said.

Italian state lender CDP, which controls Open Fiber, signed a preliminary accord with TIM in May aimed at creating a unified wholesale network operator under state control by merging TIM's fixed network infrastructure with that of Open Fiber.

CDP is preparing to make a non-binding bid for Telecom Italia's fixed grid this month as it presses ahead with plans to create a single national network champion, two people familiar with the matter said.

CDP is expected to submit its preliminary offer for TIM's network before a general election on Sept.25, the sources said, cautioning deliberations were still ongoing.

Under a scheme still under discussion, Open Fiber would be used as a vehicle to buy out TIM's domestic grid and international cable unit Sparkle, they added.

Valuation is a key issue in the long-mooted project, sponsored by Italy's outgoing government led by Prime Minister Mario Draghi.

CDP's initial valuation for TIM's network assets would not go far beyond 20 billion euros ($19.9 billion), the sources said, cautioning the assessment was still ongoing.

TIM's top investor, French media conglomerate Vivendi , has warned it would not back any deal to separate the former phone monopoly from its fixed network infrastructure for less than 31 billion euros.

Parting ways with its fixed network infrastructure would give TIM fresh resources to cut debt and to focus on its service operations, under a business plan drafted by TIM CEO Pietro Labriola.

However, existing plans for TIM have triggered some criticism from Brothers of Italy, the rightist party leading in polls ahead of the vote, which has called on CDP to suspend the process until a new government is in place.Alessio Butti, responsible for telecoms policy in the party, urged a renationalisation of TIM and called for the former phone monopoly to keep control of the network in any combination with Open Fiber while hiving off its domestic service operations and its listed Brazilian unit.

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