The market dynamic of Italy’s wireless sector is set for a major shake-up with the European Commission's (EC) recently-approved merger of the number three and four wireless players, Wind and 3 Italia.
New Market Leader
This EUR21.8 billion (USD24 billion) deal will create an entity with enough customers – a combined 31.33 million subscribers in mid-2016 – to leapfrog TIM and Vodafone, taking first place in the market.
Discussions between VimpelCom and CK Hutchison – owners of Wind and 3 Italia, respectively – had been off and on for some time. It was believed that disagreements centered on the eventual ownership of the combined operation, but a deal was eventually reached in August 2015 to create a 50:50 joint venture.
Remedy Package
With EC authorities voicing concern over the merger’s effects on competition, Wind and 3 proposed a “remedy package” to allay regulators’ fears. The companies planned to offload assets to pave the way for a new mobile network operator in Italy, keeping the market at four players.
In July 2016 Wind and 3 signed an agreement for the French telco Iliad to pay EUR450 million for 3G and 4G spectrum in the 900MHz, 1800MHz, 2100MHz, and 2600MHz bands, while Iliad agreed to acquire thousands of base stations.
The Wind/3 merger gained EC approval on September 1, 2016; the deal is expected to be completed by the end of the year.
It’s not yet known whether the two operators will retain their individual identities or move to a new joint branding.
Iliad’s French Success
Iliad, meanwhile, is ultimately looking to take a 10% share of Italy’s mobile market, although it is unlikely to repeat the startling success it had when it entered the French wireless sector in January 2012 under the name Free Mobile.
Its initial strategy to hit the market with a range of low-cost tariffs and offers targeted at Iliad’s existing fixed line customer base paid off, with a total of 2.655 million mobile numbers porting to the newcomer in the first quarter of the year.
Prior to its launch, Free Mobile had been expected to garner roughly a 5% share of the EUR25 billion French mobile market by 2015, but the company had surpassed estimates within its first year of operation, ending 2012 with a 7.9% share. It is now well on its way to catching up with the smallest of the three incumbents, Bouygues Telecom, which claimed 12.95 million customers by mid-2016, while Free had 12.08 million at the same date.
French Mobile Market Share
Italy Beckons
When it eventually launches services across the Alps in Italy, Iliad will face a much tougher challenge; it is entering an already competitive market, has no fixed line customer base to build upon, and – once Wind and 3 are combined – will be coming up against three well-established players with roughly 30 million customers apiece.
It will be fascinating to see how Iliad’s future pans out.
Pete Bell
Pete Bell is a Research Analyst for TeleGeography’s GlobalComms Database and also contributes to the daily CommsUpdate newsletter. He has a particular interest in wireless broadband and was responsible for TeleGeography’s 4G Research Service until it was integrated into GlobalComms.