Telecom Italia has approved plans to separate its fixed-line business from the rest of the group while promising to invest another 12 billion ($14.9 billion) in its domestic and Brazilian operations over the next three years.
Under pressure from Italian policymakers and new competitive threats, the Italian incumbent aims to run the fixed-line unit as a wholly owned but legally distinct entity.
By making Telecom Italia's wholesale activities more transparent, the spin-off, it is hoped, will address government concern about the operator's dominant position in the market.
Political concern has grown as Telecom Italia (TIM) has fallen under the influence of French media giant Vivendi. With a 24% stake, Vivendi is now the operator's biggest shareholder and controls the Telecom Italia board.
A spin-off could also pave the way for an initial public offering in future. There have been suggestions that Telecom Italia's network assets might ultimately get merged with government-backed broadband infrastructure to create a single national wholesale network.
Telecom Italia revealed that it would spend 9 billion ($11.1 billion) in Italy and another 3 billion ($3.7 billion) in Brazil over the next three years to bolster networks and digitalize its operations.
Besides extending its fixed and mobile networks, it wants to make a 30% reduction to so-called "human-operated interactions" by investing in "self-care" digital tools, allowing customers to fix problems themselves.
By automating other functions, it also believes it can restore growth at its ailing wholesale unit, which saw revenues in Italy fall by 5.1% last year, to about 1.7 billion ($2.1 billion).
For more details of Telecom Italia's latest strategic plan, see this story on our Light Reading sister website.
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