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Focus on Domestic Market - Fixed and Mobile Telecommunications

05/23/2017 - 04:30 PM

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TIM Group domestic competitive scenario in fixed and mobile telecommunication sectors.

The source of the information reported below is Telecom Italia 2016 Annual Report. The company usually provide only a yearly update.

In 2016, the Italian TLC market confirmed the gradual slow-down in the fall in value, which had started in the second half of 2014, simultaneously with the reduction in price-based competitive pressures, that had characterized the previous years.

Growth in Broadband and Ultrabroadband – particularly Mobile, also aided by the increased penetration of next-generation handsets – continued 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.

Fixed-line Telecommunications

05/23/2017 - 04:30 PM

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.

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).

As regards the infrastructure, Enel Open Fiber and Infratel have publicly presented development plans for their telecommunications networks, alternative to that of TIM. These plans respectively concern the main Italian cities and “market failure” areas. In this context, Infratel recently awarded all the lots of Tender Notice 1 to Enel Open Fiber. The competitive scenario in the Italian fixed telecommunications market is characterized by the presence, in addition to TIM, of a number of operators such as Wind-Infostrada, Fastweb, Vodafone, and Tiscali, that have business models focused on different segments of the market.

In 2016, the migration of customers from fixed-line to mobile telephony services continued, as well as the migration to alternative communications solutions (Voice Over IP, e-mail and social network chat), driven by the use of the Internet, the penetration of broadband, PCs and other connected devices, as well as service quality.

At December 31, 2016, fixed accesses in Italy were estimated at around 20.3 million (including infrastructured OLOs and Fixed Wireless Access), essentially stable compared to 2015.

Competition in the access market led to a gradual reduction in TIM’s market share. In the broadband market, at December 31, 2016, fixed broadband customers in Italy are estimated to have reached a penetration rate on fixed accesses of about 77%. The spread of broadband is driven not only by the penetration of personal computers and other enabled devices (e.g. Smart TVs), but also by the growing demand for speed and access to new IP based services (Voice over IP, content – particularly Video, social networking services, etc.).