John Glover in Milan
THE privatisation of Stet, Italy’s telecom group, originally set for next March, now seems certain to be delayed. Meanwhile, IRI, the giant state holding company of which premier Romano Prodi was twice president and which controls Stet, is sliding fast toward disaster.
Preventing IRI from going over the edge is vital. Its collapse would severely damage a banking system that is already grappling with an awesome pile of dud loans. As sole owner of IRI, the Treasury would be left to pick up the pieces.
IRI owns many chronic loss-makers that it must either clean up or kill off. This year IRI is expected to rack up losses of nearly three trillion lire ($2,24-billion). This will halve its net capital, forcing it either to recapitalise or file for bankruptcy.
This has left the government with a dilemma – the first option is probably illegal, the second unthinkable.
Under a 1993 agreement between the Italians and the European Union Commission, IRI was given three years to bring its debt down to a “physiological” level by selling assets, mainly its controlling stake in Stet. This is expected to be worth 13-trillion to 15- trillion lire and would beef up its capital structure, see off the threat of bankruptcy, and reduce its debt.
But a regulatory office for the sector must first be set up by act of Parliament, where the Prodi government depends on the votes of the far-left Rifondazione Communista, which is opposed to privatisation. The opposition, which claims to favour selling state firms, has not helped by burying the legislation under almost 6 000 amendments.
Meanwhile, the German government is selling Deutsche Telekom this autumn, the French are selling France Telecom next spring, leaving the Italians with the risk of being left behind.
To meet the March deadline, the Italians need to have their regulator in place by the end of this month. Though the opposition now says it will withdraw its amendments, it remains unlikely the deadline will be met.
That has left the Treasury scrabbling to rescue IRI without offending Brussels. Last week, the constitutional court put out a lifeline. The court rule that if the government decides that it does not need a “golden share” (ultimate control over ownership) if Autostrade and its motorways are sold, then a regulatory office is unnecessary, too. This opened the way to a swift sale, covering IRI’s losses.
It is also probable that Brussels will be persuaded to extend the 1993 accord to allow Stet to be sold next November.
That does not mean the government and the Treasury can break out the sparkling wine just yet. The Green Party, which forms part of Prodi’s government coalition, opposes selling Autostrade unless the government retains a golden share. And, prior to a sale,
Parliament must extend Autostrade’s concession until 2038 or it will be impossible to value the company. And the Greens are ready to give battle over that, too.