Menu

Regulatory Accounting

08/06/2012 - 08:58 AM

- + Text size
Print

Publication of the Regulatory Accounting of the Telecom Italia fixed network – Financial Year 2010


On June 26, 2012, the Italian Communications Authority (AGCom) published on its website the Reports issued by the Auditors regarding the Regulatory Accounting for Telecom Italia S.p.A. (TI) fixed network for the year 2010; the publication includes the cost accounting & accounting separation Methodology and the main results of the regulatory accounting.

This section contains some information on the above, recalling that the Reports are the result of the auditing for which the AGCom,  in compliance with the regulations in force, appointed an independent auditing firm.

Telecom Italia and the obligations of fixed network Regulatory Accounting

Under the Community Directives and national legislation [1], Telecom Italia is required to produce, besides the statutory financial statements, a specific Regulatory Accounting of the fixed network services (including Cost Accounting and Accounting Separation). In accordance with current regulations, in 2009, this Regulatory Accounting was drawn up for the Markets/Services for which Telecom Italia was identified as having “SMP”, i.e. significant market power. The Regulatory Accounting is reconciled with the Company Financial Statements for the relevant year.

The aim of Regulatory Accounting is to provide the National Regulatory Authority (AGCom), on each market for which SMP was declared, with the economic, financial and quantitative information required to enable the NRA to carry out its market regulatory and control activities. In particular the information is to demonstrate:

  • Telecom Italia’s compliance with the principle of internal-external non-discrimination in the supply of services, i.e. between the resources used for TI commercial services and the resources used for the equivalent services offered to other Operators
  • the degree of cost orientation on the regulated services’ rates (when this requirement applies)
  • the profitability resulting, on an annual basis, from the accounts of revenues earned, costs incurred and mean capital employed, considering a gross cost of capital rate defined by AGCom.

The general “rules” of Regulatory Accounting are contained in the specific EU Recommendation dated 19 September 2005 on “Accounting separation and the cost accounting in the regulatory framework of electronic communications” (2005/698/CE)”[2]; for fixed network services, these rules have been further defined by the implementation criteria issued by AGCom in the Market Analysis procedures added to the ones contained in
Decision 152/02/CONS on “equality of treatment”. The references for current cost accounting are stated in AGCom Decision 399/02/CONS.

Regarding methods, criteria and the cost basis used for the economic/financial reports of the Markets and Services subject to regulation, these are based on current cost accounting (CCA) and fully distributed costs (FDC). The only exception is the copper distribution network for which the Authority has requested to maintain the historical cost (HCA) basis.

The regulations state that the results and methods used for the Regulatory Accounting of fixed network services must be verified by an independent party (Auditor) appointed by the Authority, and that the reports of the Auditor must be published by the Authority in order to ensure an adequate transparency of information to the market. Under Art. 1 par. 6 of Dec. 152/02/CONS, Telecom Italia shall make available to the public the Regulatory Accounting information within 45 days after the publication of the above-mentioned Reports by the Authority.

Results of the auditing carried out by the Auditor appointed by the Authority

The Auditing firm appointed by AGCom for auditing the Accounting Separation for the year 2010 is Mazars [3].

The auditing of the Regulatory Accounting for the year 2010 was started by the Authority in January 2012 following the completion of the public tender for the selection of the Auditors and the completion of the audit for the year 2009.

Telecom Italia is pleased to announce that the auditing for the year 2010 has been completed with a judgment of compliance of TI Regulatory Accounting with the criteria set forth in the European and national legislation on the sector.

This positive assessment is a significant acknowledgment, also achieved for the year 2010, of the company’s constant commitment to compliance with the specific obligations on the equality of treatment and Regulatory Accounting, and attests the adequacy and reliability of the Accounting Separation information produced by Telecom Italia since 1998.

[1] Electronic Communications Code –Legislative Decree 259 of 1.8.03

[2] This Recommendation updated the one issued on  8 April 1998 on “Interconnection in a liberalised telecommunications market - Part 2 - Accounting Separation and Cost Accounting”.

[3] For the years 2002-2009 the Authority also appointed the Mazars firm, while for the period 1998-2001 the Auditor appointed was KPMG.