Country Profile—Italy

By Stephanie Heney, contributed by SMi Publishing

With an overall population of 57 million and a "teledensity" of 47%, Italy's mobile industry is one of the strongest in the world. Italy has 32.4 million cellular users, and in 1997, revenues were at $26.1billion.

Contents
Recent Events
Regulation
Main players
Acknowledgement

Just this year Italian telecoms has seen a great deal of activity. Local telephony was due for liberalization on January 1 this year, and already Telecom Italia is under investigation by the EU.

Recent Events (Back to top)
In March this year, Italy's telecoms regulator outlined the country's UMTS tender, stipulating that new market entrants must pay at least 350 billion to 550 billion lire for a license to operate the next-generation cellphones. It also announced that new UMTS operators reaching at least 10% of the Italian population would have the right to roam on existing operators' networks. These operators would be required to allow roaming to the new entrants for at least 30 months over all Italy and 60 months in areas not directly covered by the new operator.

However, things changed in the wake of the UK UMTS auction furor. Italian Communications Minister, Salvatore Cardinale, said that five next-generation UMTS cellphone licenses would be awarded in an auction, with the winner decided on the basis of certain pre-set parameters. An undersecretary in the outgoing government said the licenses would be awarded to the highest bidder, rather than a "beauty parade" as reported initially.

All definitive decisions have been delayed until the new government has taken office. But encouragingly, Cardinale kept his job during the government hand-over. New Prime Minister Giuliano Amato had told parliament that the UMTS license auction had to raise at least 25 trillion lire ($11.83 billion)— far higher than the three to four trillion lire first pencilled in.

There are at least seven potential UMTS bidders:

• Telecom Italia Mobile (TIM)
  
• Omnitel, controlled by Germany's Mannesmann
  
• Wind, owned by Italian electricity group Enel, Deutsche Telekom, and France Telecom
  
• Blu, a consortium including motorway operator Autostrade and British Telecom
  
• Dix.it, a consortium partnering Pirelli, IFIL, Banco di Roma, and e.Biscom
  the Andala consortium grouping Italian Internet provider Tiscali, holding company CIR, bank Sanpaolo IMI, and other investors
  
• Spain's Telefónica, with Rome utility Acea.

With the new-found expectation of revenue from these licenses, insiders are saying that Italy would inject the cash into new technologies. Plans are also afoot to increase competition in the banking industry. However, the mobile phone companies are saying that an increased price for the UMTS licenses would divert money away from infrastructure investments.

In March 2000, the merger between Tin.it (Telecom Italia's ISP) and Seat Pagine Gialle was approved. This provides the Italian domestic market with a leading Euro Internet business. The merged company will have more than 2.6 million subscribers and the most visited portals in Italy (more than 180 million hits per month).

A major recent event for Italy was Olivetti's attempt to take control of Telecom Italia. As a result, German company Mannesmann, trying to join in the race to gain control of Telecom Italia with a $94 billion bid, gained full control of Infostrada, which it had previously operated in partnership with Olivetti. Eventually, Olivetti paid approximately $55 billion to secure a 51.9% stake in Telecom Italia.

In October last year, Spanish Telefónica formed a joint venture with Rome's utility company, ACEA, with the intention of constructing a 250 km fiber-optic network across the city. ACEA-Telefónica plans to offer voice and data services and high-speed Internet to both residential and business customers. The partners expect to invest around EUR200 million on infrastructure rollout. Telefónica is moving into the Italian market after Telecom Italia SpA, (former state monopoly), emerged as a main rival to Spain. Telecom Italia owns Retevision, Spain's No. 2 telephone company, in partnership with Spanish power utility Endesa SA and other investors.

Regulation (Back to top)
Responsibility for Italian telecoms is shared between the Ministry of Communications (Ministry of Posts and Telecommunications until mid 1997) and the new Autorita per la garanzie nell comunicazioni, which was formed on January 1, 1998. There was a great furor around Telecom Italia's privatization, which was delayed due to the inclusion of broadcasting as well as telecoms in the new regulatory regime. Laws were even blocked in parliament to prevent the sale of Telecom Italia. The EC has had a great deal to do with Italian telecoms, and the latest investigation is just the most recent in a line of interventions.

In March 1998 a meeting between EC competition chief, Karel Van Miert, and Antonio Maccanico, Minister of Communications, led to an agreement on compensation for Omnitel-Pronto Italia over the $400 million fee it paid when gaining a license in March 1994. Telecom Italia Mobile had been expected to pay the compensation and appealed to the EU's decision to award it to Omnitel. However, after the legal wrangles had gone on until 1998, Telecom Italia Mobile withdrew its appeal.

Further controversy resulted from the award of the third cellular license, setting Wind and Albacom against each other, with Albacom slated as the likely victor. Wind turned out as the winner, launching cellular services in 1999.

Telecom Italia still seems to be dogged by political wrangles. If history is anything to go by, the current EU investigation is likely to come as no surprise to the Italian telecoms market.

Main players (Back to top)

• Albacom—Set up to act as a distributor for BT's Concert portfolio to provide services to business customers. Although business customers are the main target for Albacom, it is keen to enter the local telephony market in Italy and has been in talks with Italian mobile license holder Blu with regard to offering a converged fixed/mobile service.

• Blu S.p.A.—Blu was the fourth mobile phone operator to be awarded a license in Italy after Telecom Italia Mobile, Omnitel, and Wind. It won the license in July 1999. Blu is controlled by Italian motorway operator Autostrade, which holds a 32% stake. British Telecom has a 20% stake, and Edizione Holding, which controls Benetton , Mediaset, and Distacom have 9% each. Banca Nazionale del Lavoro (BNL), Italgas, and Roma Ovest Costruzioni Edilizie each hold 7% of Blu.

• e.Biscom—e.Biscom has formed two joint ventures with Milan utility AEM. The first, MetroWeb, has built a 370-mile fiber-optic network with plans to expand it to 900 miles by 2009. The second, FastWeb, is to offer video, voice, data, and Internet services through the network to residential and business customers. e.Biscom is part of a consortium bidding for a mobile telecom license. It is majority-owned by its founders, former Omnitel Pronto Italia CEO Silvio Scaglia (45%) and Andrea and Francesco Micheli (30%).

• ELSACOM S.p.A. Globalstar—In April 1998, Globalstar announced that founding partner Elsacom, an Elsag Bailey/Finmeccanica company, had signed an agreement with Omnitel for the distribution of Globalstar services in Italy. Omnitel offered the Globalstar satellite extension of GSM coverage to Italian cellular customers. The deal provided cross-standard and worldwide coverage to Omnitel Globalstar subscribers.

• ELSAG S.p.A. —Established on November 1, 1998, Elsag S.p.A was formerly a division of Elsag Bailey, a Finmeccanica company, one of Italy's largest industrial groups. With revenues of about $370m in 1997 and more than 2,200 employees, Elsag S.p.A. is now one of Italy's leading suppliers of IT solutions and services. Elsag S.p.A. operates as project integrator and services provider through long-lasting partnerships with selected customers within the banking and finance, manufacturing, and public and private utilities industries.

• Fondazione Ugo Bordoni—Non-profit Italian Research Institute working in the field of telecommunications.

• Infostrada S.p.A.—Infostrada provides fixed-line telephone service as a competitor to former monopoly Telecom Italia. A subsidiary of Mannesmann, Infostrada is quickly gaining market share and has about 2.4 million business and residential customers. In 1998, Infostrada was allowed to offer only domestic and international long-distance phone service, but this year initiated the provision of local services in 52 districts under the Pronto brand. It also serves more than a million subscribers with dial-up Internet access, including free access plan Libero (though in Italy customers pay by the minute for phone calls). Mannesmann took full ownership of the former joint venture from partner Olivetti in 1999.

• Omnitel Pronto Italia S.p.A.—Omnitel is one of the world's fastest revenue-making wireless start-ups and Italy's first completely private cellular operator. In 1998 Omintel had profits amounting to 781 thousand million Italian lire, 1,300 thousand million invested in 1998 and a market share of 42.6%. With this data, Omnitel confirmed its ranking as the second European mobile telephony provider. Omnitel, which uses the GSM standard, now has 10.5 million subscribers. Founded in 1995, the company has launched wireless Internet services and an Internet portal, accessible from a PC or any type of phone, which allows users to access more than 150 services. UK-based mobile phone giant Vodafone AirTouch, which gained a 54% stake in Omnitel Pronto Italia through its acquisition of Germany's Mannesmann, owns more than 75% of the company. Bell Atlantic owns 23%.

• Pirelli Cavi e Sistemi S.p.A —Produces transmission equipment, connectors, patch panels, tools, cable assemblies, active components, passive components, installation components, and copper in Italy

• PLLB Elettronica S.p.A.—PLLB is an Italian manufacturer that designs, develops, and manufactures measuring instruments, equipment, and systems for the telecommunications industry.

• Telecom Italia Mobile S.p.A.—With 19,200,000 clients in Italy (March 31, 2000), more than 9,200 employees, and thousands of shareholders throughout the world, TIM is the largest mobile telephone services operator in Europe by total client base and ranks first in the world by GSM customer base.

• Telecom Italia S.p.A.—Former state monopoly Telecom Italia provides a wide range of telecommunications services in Italy and has interests in some 100 businesses in more than 30 other countries, mainly in Europe and Latin America. In Italy, Telecom Italia is the No.1 fixed-line operator, No.1 wireless provider (through 60%-owned Telecom Italia Mobile), and No.1 ISP (Tin.it). Telecom Italia also provides satellite communications and manufactures telecom equipment. Former rival Olivetti owns a majority share of Telecom Italia, and institutional and private investors hold the remaining shares. At the end of June last year, it had 26.23 million local subscribers, up slightly from 25.99 million six months earlier, and penetration was at approximately 45%. In March this year, Telecom Italia rolled out its ADSL infrastructure in 25 cities.

• Tiscali S.p.A.—Tiscali has popularized free Internet access in Italy. The company's TiscaliFreeNet has won 1.9 million customers with its no-fee dial-up Internet access. The company also offers prepaid telephone service and e-commerce and Web site creation services, and it is expanding its operations throughout Europe. Chairman Renato Soru founded Tiscali in 1997 and owns almost 70% of its shares.

• Wind Telecomunicazioni S.p.A.—Consortium formed in November 1997 by Enel, an Italian electricity company, France Telecom, and Deutsche Telekom. After DT failed to merge with Telecom Italia last year, Enel and France Telecom filed lawsuits against Telekom accusing it of breaking the terms of their partnership. As a result, Deutsche Telekom representatives were removed from the Wind board. Rumors suggest that France Telecom is to bid for the German stake in the consortium.

Acknowledgement (Back to top)
This article from the May 2000 edition of the European Telecoms Intelligence Bulletin was reprinted with permission from SMi Publishing.