The rollout of next-generation networks is proceeding as planned, but Telecom Italia still needs something of an Italian renaissance if it is to achieve its goal of stabilizing sales and profits over the 2013-16 period.
Due to report results for its 2014 financial year on February 20, when it also expects to present a new 2015-17 plan, the Italian incumbent last week claimed to have smashed annual targets in its 2014-16 plan by extending 4G networks to 80% of the population and making fiber broadband services available to 30%.
Published in November 2013, the 2014-16 plan contains objectives of covering 50% of the population with fiber and 80% with 4G by the end of 2016.
Even so, while the operator appears to have hit its 4G goal for 2016 two years early, and to be on track with fiber, its financial targets look considerably more daunting.
Telecom Italia (TIM) wants to stabilize revenues and EBITDA over the 2013-16 period, but figures have continued to fall amid fierce competition from players such as Vodafone Italy and Wind Telecomunicazioni SpA , with Italy's ailing economy putting further pressure on the incumbent.
On a year-on-year basis, group revenues fell by 9.1%, to €17.6 billion (US$20.1 billion), during the first nine months of 2014, while EBITDA sank by 7.7%, to €7.1 billion ($8.1 billion).
During an earnings call in November, however, executives were quick to seize on signs of an improvement in the Italian market, which still accounts for more than 70% of Telecom Italia's revenues. During the third (July-to-September) quarter, consumer revenues fell by just 5.2% (year-on-year), compared with 9.2% in the second quarter and 11.7% in the first.
Telecom Italia attributes these improvements to the investments it has been making in higher-speed services. It has also been ushering in new tariffs and driving customers toward service bundles -- a strategy that is set to gather pace in the months ahead.
In its latest announcement, the operator unveiled plans to lump all of its various products and services under the TIM brand, which has previously been used to support mobile activities. That suggests the company is looking to compete more aggressively and with greater purpose in the burgeoning quad-play sector.
Moreover, thanks to a related overhaul of its pricing, fixed-line customers will from May be able to pay a flat monthly fee of €29 ($33) for line rental and unlimited calls to fixed and mobile numbers in Italy. For €44.90 ($51.30) per month, customers will be able to add a broadband service to the telephony deal, while those already making use of copper-based ADSL services will be offered a free upgrade to fiber.
By simplifying its tariffs and making it easier for customers to upgrade, Telecom Italia hopes to spur adoption of what it calls "ultra-broadband services."
Meanwhile, the changes to the pricing of fixed-line voice services are clearly intended to mitigate the continuing erosion of the fixed-line customer base. Telecom Italia lost more than 700,000 "physical accesses" between September 2013 and September 2014, finishing its third quarter with about 19.8 million in total.
When Telecom Italia publishes fourth-quarter results later this week, much of the analyst attention may be on mooted takeover activity in Europe and Latin America. But investors will also be looking for continued improvements in the Italian revenue trend: Any slippage and Telecom Italia may have to rethink the timeframe of its recovery.
— Iain Morris, , News Editor, Light Reading