"Italy Telecommunications Report Q4 2013" is now available at Fast Market Research

Mounting debts and exposure to the crumbling European finance markets have forced the incumbent to shed less profitable non-core operations, including key parts of its media empire, overseas operations such as its stake in the Cuban state telephone and its global wholesale service provider. The company is also considering the divestiture of its legacy fixed-line business, either in whole, in part or through a public share offering. The rumoured merger between Telecom Italia and 3 Italia collapsed during Q213 for regulatory, financial and political reasons. With bids for smaller fixed-line provider Tiscali expected too, we expect competition will force consolidation in the sector. Elsewhere, operators need to justify investments in next-generation broadband infrastructure amid reduced traffic termination rates and the increasingly chilly consumer spending scenario. The main bright spot remains mobile value-added services), but even here, there will be limits to growth potential despite the proliferation of smartphones and tablet consumers.

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Key Data

* Mobile average revenue per user declined sharply in H113 as a result of falling voice usage, the introduction of cheaper tariffs (with free calling and messaging offered as an incentive) and cuts to termination rates all conspiring to erode revenue. More cuts are expected in July 2013, but a degree of stability should begin to creep in from 2014.
* Uptake of 3G subscriptions remained robust even in a difficult economic climate as consumer demand for smartphones drove growth. AGCOM reported 16.7% year-on-year (y-o-y) growth in 3G subscriptions during Q113.
* The dedicated mobile broadband market continues to expand rapidly, with connections increasing by 23.6% y-o-y in Q113. Accordingly, we forecast continued growth in total broadband subscriptions for the duration of our forecast to 2017, but growth will be limited by saturation in the fixed-line broadband segment.

Key Trends And Developments

Besides increased impetus in the roll-out of 4G LTE services across Italy, the first half of 2013 have focused largely on the prospects of consolidation within the fixed-line market.

Tiscali, one of the smaller alternative players in Italy's fixed-line telephony and broadband markets, is reportedly being viewed as an acquisition target. WIND Telecomunicazioni, Sky Italia and Poste Italiane would all have very different reasons for acquiring the company, which has been struggling to attract and retain customers for several years. WIND would be the strongest candidate, financially and operationally, but BMI believes Sky may be looking to leverage the success it has enjoyed in the UK through offering converged voice, video and broadband services.

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