Telecom Italia Eyes Emerging Markets

With new investor Telefónica SA (NYSE: TEF) watching from the sidelines, Telecom Italia (TIM) today outlined its vision for the next few years as it announced 2007 revenues of €31.3 billion ($48 billion) and a net profit of nearly €2.5 billion ($3.8 billion). (See Telecom Italia Outlines Plan, Telecom Italia Reports 2007, and Telefónica Takes Stake in Telecom Italia.)

And that vision could involve the sale of some international operations, with the French broadband business favorite to be sold off.

The carrier is looking to its international operations -- European broadband (France, Germany, Netherlands) and Latin American mobile (mainly Brazil, but also Argentina and Bolivia) -- to continue providing growth, as they did last year. European broadband revenues grew 68 percent to €1.55 billion, while Brazilian mobile revenues grew 26 percent to €5 billion.

At the same time, the carrier wants to stabilize its domestic business, where revenues are shrinking -- down 6 percent in 2007 to €24.2 billion ($37 billion), mainly due to the impact of recent domestic and pan-European regulation. (See Euro Carriers Cut Prices.)

But while TI seems happy with its Brazilian mobile operations (31.3 million customers) and Hansenet broadband business in Germany -- it is the country's fourth largest broadband player with 2.3 million customers (about 13 percent market share), and is aiming for up to 2.7 million by the end of 2008 -- it notes that it plans to "reconsider its presence in areas in which market conditions or the structure of the business model do not ensure adequate returns."

TI's French unit is way behind the broadband market leaders Orange (NYSE: FTE), Neuf Cegetel Group (Euronext: NEUF), and Iliad (Euronext: ILD), and is already believed to be on the block. (See French Carriers Ramp Up IPTV Subs and Au Revoir, Alice?.)

There's room for expansion with its international mobile operations, though, as the company is assessing "possible growth opportunities in new markets in which the company believes it can create value, beginning with the mobile business model."

TI is already believed to be checking out options in Eastern Europe, but also identified Asia/Pacific, Africa and the Middle East as regions with high growth potential. (See Italians Eye Expansion, A Guide to India's Telecom Operators, Who Does What: Middle East Carriers, and Top Ten: Emerging Markets Carriers.)

In the domestic market, TI is looking to grow its fixed and mobile broadband subscriber numbers (6.4 million fixed and 6.1 million 3G customers currently) and deploy technology that will enable fixed and mobile service integration. To achieve this it has earmarked €11 billion in capital expenditure for the next three years.

— Ray Le Maistre, International News Editor, Light Reading

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