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Italy - Market Intelligence Report
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Market Intelligence Reports provide an invaluable mix of vital market data and background information, including telecoms regulation. Worth an estimated €37,682 million in 2005, Italy's telecommunications services market continues to be dominated by incumbent fixed-line services provider, Telecom Italia, and a handful of long-term alternative operators whose market presence is gradually increasing as a result of intensified competition and a spate of mergers and acquisitions. In the fixed-line sector, Telecom Italia accounted for 78% of all voice telephony revenues in 2005, down from nearly 79% in 2004. However, this dominating market share disguises the fact the incumbent derives a large proportion of its revenues from interconnection arrangements with the increasing number of alternative fixed-line and mobile operators. In the voice market overall, competitors accounted for 32.6% of traffic minutes in 2005, while in the local calls market they accounted for 28.7% of traffic minutes. In the national calls market, competitors accounted for 26.8% of traffic. In the international calls market, however, competitors accounted for 53.2% of traffic minutes in 2005, over half of the market. In the fixed-to-mobile sphere, the competitors accounted for 34.6% of all traffic minutes in 2005. Major rivals to Telecom Italia included BT Albacom and Atlanet (subsequently merged as BT Italia), Wind Telecomunicazioni, Tele2 Italia, Fastweb, COLT, ePlanet, and Tiscali. Through its wholly-owned mobile subsidiary, Telecom Italia Mobile (TIM), the incumbent also has a market-leading share of Italy's cellular telephony user base. There were 81.816 million cellular and 3G subscribers in Italy as of September 2006 (latest data), and TIM's GSM-based digital cellular network accounted for 33.72% of all subscribers; its nascent 3G operation accounted for a further 4.77% of all subscribers. TIM's main rival is Vodafone-controlled Omnitel; its GSM network served 30.73% of all subscribers as of September 2006 while its 3G service accounted for a further 4.50%. Fixed-line operator Wind is also active in the wireless market and accounted for 17.72% of all subscribers. However, Wind - along with Vodafone - is seeing a reduction in market share following the launch of 3 Italia's 3G service; 3 Italia had 8.56% of all wireless subscribers as of September 2006. Vodafone may seek to re-establish its grip in Italy by deploying fixed broadband services, as it has already done so or is comtemplating in other European markets. A likely target would be broadband operator Fastweb, and speculation mounted in 2006 over a possible alliance and/or partnership between the two. This has yet to occur, but with Silvio Scaglia selling just over 6% of his shares in Fastweb in early-2007, and with Fastweb needing cash to finance its planned WiMAX deployment, a tie-up with Vodafone could still be on the cards. Telecom Italia has also attracted attention from would-be investors, following the announcement in late-2006 by Pirelli chairman Marco Tronchetti that he would be open to investment by foreign companies in Olimpia, the holding company controlled by Pirelli which itself controls Telecom Italia. A mis-handled announcement concerning plans to restructure Telecom Italia alerted private equity companies and rival telecommunications companies alike to the possibility that Telecom Italia, in whole or in part, could be up for sale. It was not until January 2007 that Telecom Italia unveiled a new business structure and corporate strategy that clearly indicated that TIM and - crucially - TIM's Brazilian business would remain part of the group. Nevertheless, this does not appear to have deflated interest in the Italian operator and, at the time of writing, it was reported that Telefonica SA of Spain was actively negotiating to purchase a stake in Olimpia. Although Telefonica has suggested that it merely wants to increase the scope of its European investments, analysts are convinced that the Spanish company is more interested in TIM Brasil (which would augment Telefonica's own flagging Brazilian wireless business) and Telecom Italia's extensive European and transcontinental fibre-optic networks.
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