Italia on pay TV road without spinoff route

Drops plan to unload subsidiaries

ROME -- Telecom Italia has officially abandoned its plans to spin off its various subsidiaries, saying Wednesday that while it will continue developing a plan to become a media player in the pay TV sector, it will do so within a single unified company.

The controversial plan to focus on pay TV was first announced by former chairman Marco Tronchetti Provera, who stunned observers by unveiling a plan earlier this year to sell control of the company's profitable mobile phone unit and morph the company into an online media content provider. That announcement sparked a series of events that eventually led to Tronchetti Provera's resignation Sept. 11.

Tronchetti Provera was replaced by former Sen. Guido Rossi, who at first said he would stay the course set by his predecessor. He later said that, while Telecom Italia Mobile would be spun off into a separate company, it would still be controlled by Telecom Italia.

Now the company is saying it will stick with its previous strategy of converging all the subsidiaries into the parent company.

Company officials said that the latest change does not mean that the Internet-television venture will be scrapped, only that it will not be the central plank Tronchetti Provera had envisioned.

"We still believe Internet television is a high-growth sector that Telecom Italia wants to be involved in," a spokesman said in an interview. "But that does not mean we will stop being a telecommunications company."

Telecom Italia's move into the fast-growing new sector sparked a rush of followers, including Silvio Berlusconi's Mediaset, which said Wednesday it will establish an on-demand Internet television company by early next year, and Rupert Murdoch's Sky Italia, which last month signed a distribution deal with Italian ISP Fastweb.

Part of the reason for the spinoff was to lower the company's estimated ?40 billion ($51 billion) debt load with the cash raised by selling all or part of TIM. In its statement, Telecom Italia did not address that issue directly, but did say that it will not lack the cash to carry out its plans.

The market here welcomed the decision to abandon the spinoff plans. The company's beleaguered stock quickly leapt nearly 3% on the news.