Italian mobile market: Wind Tre biggest, but TIM leads revenue growth ahead of Iliad entry

Tuesday 25 April 2017 | 14:00 CET | Background

As Iliad prepares to enter the Italian market, the three incumbent operators are re-positioning to protect their shares. Wind Tre, formed from the merger of Wind and 3 Italia at the end of 2016, has become the biggest mobile operator in terms of mobile SIMs and tied for number two in service revenues, according to the latest figures from Telecompaper. Furthermore, in contrast to other European mobile markets, Italy is growing, with service revenues up 0.7 percent year-on-year in the last quarter of 2016, led by market leader TIM.

The merger of Hutchison’s 3 Italia and Wind (owned by Veon, former Vimpelcom) was finally approved at the end of October 2016 by the country’s Ministry of Economic Development, after the European Union’s antitrust authorities cleared the deal a month earlier. More recently this approval has been contested by rival operator Fastweb, which claims that competition authorities failed to conduct a fully transparent market test to prove that newcomer Iliad would be able to compete as a fourth operator.

The merged entity baptised Wind Tre became operational in December 2016 and reduced the market from four to three players. Wind Tre has a market share of 37 percent, out of a total 84.2 million SIMs in Italy at the end of 2016 (see graph below). The merger approval granted by the EC was conditional on the new company selling assets in order to create room for a fourth mobile operator. The parties proposed the French telecommunications operator Iliad, and this was approved by the EC. Assets to be acquired by Iliad include mobile spectrum in the 900, 1,800, 2,100 and 2,600 MHz bands, totaling 35 MHz; access to a large number of decommissioned and available sites; a RAN sharing option on the Wind Tre network for the last 25 percent of the population and a 10-year roaming agreement for a smooth transition until Iliad’s network is up and running. Iliad said in March that it was getting ready for the launch and has already secured access to more than 9,000 km of fibre, chosen selected key suppliers and is working on core network installations and interconnection.

New entrant Iliad getting ready for possible year-end launch

Iliad is keen to exploit the experience it has acquired in France, where it also launched as a fourth mobile network operator under the brand Free back in 2012. This resulted in quite a shake-up of the market, the impact of which is still being felt. We expect Iliad to introduce a similar strategy in Italy, with a simple proposition as in France. This should lead to much more intense competition and downward price pressure. Even though most plans and users in Italy are still on prepaid (more than 75% of all SIMs in Q4 2016), we expect the new operator to focus on a postpaid plan, as in France, likely with a promotional offer waiving the mandatory state concession tax.

According to recent comments from Iliad's founder Xavier Niel, the company plans to launch its Italian mobile service under the Free brand between November 2017 and January 2018 and will initially aim for a market share of 10-15 percent. Niel confirmed that Iliad plans to shake up the Italian market, which he said "in value terms has dimensions equal to that of the French market, even though there are 6 million fewer inhabitants." Claiming that Italians "already pay 10 percent more than the French," he said Iliad wouldn't "mistreat" Italian consumers with "little tricks" and would "create an operator that is loved by the population." He also said Iliad expects to reach a break-even point in Italy quickly, well before it reaches a 10 percent market share.

TIM pre-empts Free arrival with launch of low-cost Kena Mobile

In an attempt to preempt Iliad’s likely aggressive pricing, Telecom Italia (TIM) recently launched a low-cost, no frills service called Kena Mobile. While the TIM brand is positioned as a premium 4G+ provider, Kena Mobile focuses on online distribution of a range of low-cost prepaid plans starting at EUR 3.99 a month. Consumers can choose from 1,000 minutes or 4GB of 3G data for EUR 3.99 each, rising to EUR 9.99 for the Kena Digital plan with 600 minutes, 6GB of data and 100 SMS. 

The question remains will this be enough. We expect Iliad to not only provide low prices with large data bundles but also offer extra services, such as free calling and roaming to foreign countries (even outside the EU). The largest plan of Free in France (EUR 19.99 pm) offers unlimited calling to fixed numbers in 100 destinations. We also expect Wind Tre to refresh its offers in the near term and make them much more attractive before Iliad’s entrance on the market.

Italian mobile market grows for fifth consecutive quarter

In the mean time, the mobile market in Italy seems to be recovering, as service revenues grew for the fifth quarter in a row on an annual basis in Q4 2016. Mobile service revenues rose by 0.7 percent to a total of EUR 3.4 billion, in line with growth of around 1 percent annually in previous quarters. The Italian market is a volatile market as prepaid is still dominant, accounting for 66.4 percent of the total service revenues in Q4 2016. This is in part due to the state concession tax, which is mandatory on subscription plans, while operators also prefer to promote prepaid bundles. However, postpaid showed growth in the past two quarters. 

The market is still dominated by TIM in terms of revenues, and the operator showed the strongest growth in Q4 2016. Its market share increased to almost 36 percent in Q4 2016. Vodafone also increased its mobile revenues and slightly grew its share to 32 percent. Vodafone is now tied with Wind Tre for second place, as the latter also had 32 percent of revenues in Q4.

The above figures are based on Telecompaper’s database on the Italian mobile market, which are available for purchase. For more information, click here.

Free Headlines in your E-mail

Every day we send out a free e-mail with the most important headlines of the last 24 hours.

Subscribe now

::: add a comment