September 14, 2016 / 9:22 AM / 2 years ago

UPDATE 2-Telecom Italia says undaunted by Iliad's Italy venture

* Telecom Italia plans counter measures to defend position -CEO

* Iliad sees securing 15 pct of Italy market as “reasonable”

* Telecom Italia’s Q3 numbers “very positive”, CEO says (Adds details throughout)

By Alberto Sisto and Stefano Rebaudo

ROME/MILAN, Sept 14 (Reuters) - Telecom Italia is not worried about French telecom group Iliad’s entry into the Italian market and plans counter measures to defend its position, the head of the firm said on Wednesday.

France’s Iliad agreed to become Italy’s fourth mobile operator to help smooth the way for CK Hutchison Holdings to merge its 3 Italia with Vimpelcom’s Wind.

“Iliad’s entry into Italy does not worry us. Italy is a very different market to France,” Flavio Cattaneo said on the sidelines of an event in Rome.

Iliad Chief Executive Maxime Lombardini said last month that securing a 15 percent share of the Italian market or of its value was a “reasonable target”. The low-cost operator managed to grab 17 percent of the French market in just four years.

“Iliad cannot take advantage of the surprise effect and from our side there will be counter measures that are adequate and coherent with our positioning in the market,” Cattaneo said.

Analysts expect Iliad’s entry into Italy to be gradual, as it also depends on it securing frequencies from Wind and 3 Italia, a process that could take up to three years.

Iliad’s main challenge will be to compete in a mature market, where prices are already low, where the French operator lacks a distribution network and where its brand is not known.

Italy’s average revenue per user (ARPU), an industry bellwether of performance, is one of the lowest in Europe at around 13 euros per month, they said.

“Iliad has certainly secured good network conditions (spectrum, sites and roaming) and has the know-how and expertise but we think that as a greenfield operation the commercial challenge will be significant,” Kepler Cheuvreux analysts said in a note.

Italy’s anti-terrorism law also requires owners of a SIM card to be identified with an identity card, creating an additional hurdle to getting new customers.

However, Iliad sees Italy’s telecoms market as attractive, with potential to compete on prices, it said in August. It plans to break even at the core earnings level with a market share of less than 10 percent.

Analysts also said the fact that a lion’s share of Italy’s mobile market is pre-paid will make it more difficult for existing operators to protect their customer base. They expect Iliad to launch its first offer on the market by mid-2017.

Shares in Telecom Italia, which have lost more than 30 percent this year, were down 1 percent at 0.75 euros by 1415 GMT.

Cattaneo, who became chief executive in April and has promised to step up cost cutting to boost profitability at the heavily indebted former state phone monopoly, said Telecom Italia’s results for the third quarter were “very positive, both in terms of the EBITDA margin and for the top line”.

$1 = 0.8913 euros Additional reporting and writing by Agnieszka Flak; editing by Jason Neely

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below