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Focus on Domestic Market - Fixed and Mobile Telecommunications

08/04/2016 - 03:00 PM

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The Telecom Italia Group domestic competitive scenario in fixed and mobile telecommunication sectors.

The source of the information reported below is Telecom Italia 2015 Annual Report. The company usually provide only a yearly update.

In 2015, the Italian TLC market showed continued signs of a reduction in price-based competitive pressure, as already seen in the second half of 2014. This helped to slow the gradual fall in the value of traditional service components – voice, above all – of previous years.

Growth in Broadband and Ultrabroadband – particularly Mobile, also aided by the increased penetration of next-generation handsets – continues to be the main driver of the market. The competitive scenario remains characterized, on one side, by the opening of the TLC market to competition from non-traditional operators (in particular Over the Top companies (OTTs) and producers of electronic and consumer devices), and, on the other side, by telecommunications operators having the opportunity to develop new "over the network" services (mainly in the IT and Media fields). Consequently, telecommunications operators not only face ‘core competition’ with other operators in the sector (including Mobile Virtual Operators) – still the factor that has the greatest impact on market trends – but must also deal with the ‘invasion’ by OTTs and device producers, which operate entirely in the digital world, using completely different assets and competitive strategies to TLC players.

Over time, therefore, the traditional players' business models are changing to meet the challenges from the new entrants and to exploit new opportunities.

 

Competition in fixed telecommunications

The fixed-line telecommunications market continues, on one side, to see a significant decline in access and voice revenues, due to the reduction in accesses and rates and the progressive shift of voice traffic to mobile, and on the other side, the continued growth of broadband revenues; the decline in revenues from the data transmission segment continues.

In recent years, operators have concentrated mainly on developing the penetration of Broadband and defending Voice by introducing bundled voice, broadband and services deals in a highly competitive environment with consequent pricing pressure. The evolution of the competitive product offering has also been influenced by consolidation, among competitors, of an approach based on the control of infrastructure (above all Local Loop Unbundling - LLU). The main fixed operators are also offering mobile services, also as Mobile Virtual Operators (MVOs).

The competitive scenario in the Italian fixed telecommunications market is characterized by the presence, in addition to Telecom Italia, of a number of operators such as Wind-Infostrada, Fastweb, Vodafone, BT Italia and Tiscali, that have different business models focused on different segments of the market.  

At December 31, 2015, fixed accesses in Italy totaled approximately 20.2 million (including infrastructured OLOs and Fixed Wireless Access), down from 2014. Competition in the access market led to a gradual reduction in Telecom Italia's market share. In the broadband market, at December 31, 2015 fixed broadband customers in Italy reached a penetration rate on fixed accesses of about 74%.  

 

Competition in mobile telecommunications

The mobile market, which is saturated and mature in its traditional component of voice services, experienced a decline in the number of lines, due to the rationalization of second and third SIM cards (at December 31, 2015, mobile lines in Italy numbered about 92.7 million, down by about 1.7% over 2014, which still represents a very high penetration rate of the population, of approximately 152%).

Revenues from traditional service components, such as voice and messaging, continued to decline, both as a result of competition between operators and of the increasing spread of "communication apps”, but in 2015 it saw a gradual improvement compared to the drop of 2013 and the first half of 2014.

Mobile Broadband continued to grow and, although being unable to offset the drop in revenues from traditional services, it represents the main strategic and business opportunity for the mobile TLC industry, also due to the launch of LTE Ultra Broadband. In 2015, the growth in mobile broadband customers continued thanks to the development of the small screen segment, with a high penetration rate on mobile lines, especially as a result of the increasing spread of smartphones. Alongside innovative services that have already caught on and are under full-scale development, as in the case of mobile apps, there are other market environments, associated with the development of mobile broadband, with major potential for growth in the medium term, such as the Internet of Things and mobile payment.

The competitive scenario in the Italian mobile telecommunications market is dominated by Telecom Italia and also by three other infrastructured operators (Vodafone, Wind, H3G) which are focused on different segments of the market or have different strategies. In August 2015, VimpelCom and CK Hutchinson also announced that they had reached an agreement to establish an equal joint venture between Wind and 3 Italia, subject to the necessary regulatory clearance (final decision should be communicated at the beginning of September). In addition to these operators, the field also includes mobile virtual operators (MVO), of which PosteMobile is the most important player. These operators continue to enjoy significant growth compared to infrastructured operators.