Video services

Telecom Italia Makes Quad-Play Move With Sky

Telecom Italia has launched a quad-play package in partnership with Sky Italia, offering customers a telephony, broadband, mobile and TV service for less than €40 (US$42.80) a month.

The new deal marks the Italian phone incumbent's first major converged-services move since it announced earlier this year that it would begin marketing all of its offerings under the TIM brand, which has previously been dedicated to mobile. (See Telecom Italia, Sky Launch Internet TV Service and Telecom Italia Rejigs Services in Recovery Bid.)

But the low prices could trouble investors already concerned about the profitability of bundled services, especially given Telecom Italia (TIM) 's plans to increase capital expenditure over the next three years. (See Telecom Italia Forecasts Some Pain Relief.)

Telecom Italia's share price had fallen by around 3% in late-afternoon trading in Milan on April 16.

The quad-play offering will be available for a 12-month period to customers with a fiber-based broadband service of between 30 Mbit/s and 100 Mbit/s or a 20Mbit/s ADSL one.

Broadband customers who simply want to add TV to their package will be able to do so for an extra €14 ($15) a month, said Telecom Italia and Sky in a joint statement.

The Sky service is supposed to match that available to the broadcaster's satellite customers and will include more than 150 channels, including the usual premium sports content, as well as catch-up and recording features.

Want to know more about pay-TV subscriber trends? Check out our dedicated video services content channel here on Light Reading.

The tie-up appears to be the fruit of an agreement that Telecom Italia signed with Sky Italia last year, since when ownership of the broadcaster has changed hands.

In July last year, the UK's Sky (previously BSkyB) agreed to buy Sky Italia from Rupert Murdoch's 21st Century Fox for £2.45 billion ($3.65 billion), announcing a takeover of Sky Deutschland at the same time. Both deals were completed in November 2014.

Telecom Italia hopes Sky's content will attract broadband customers from rivals investing in their own high-speed fixed-line networks.

"We are convinced that this strategic deal is an important driver for the development of the new ultra broadband networks," said Marco Patuano, Telecom Italia's CEO, in a company statement.

In February, Patuano said Telecom Italia would spend €10 billion ($10.7 billion) over the next three years on capital expenditure, including nearly €3 billion ($3.2 billion) on the rollout of fiber networks. (See Telecom Italia to Invest €3B in Fiber to Spur Growth.)

That marks a substantial increase on spending of €8.9 billion ($9.5 billion) over the 2012-14 period and is aimed at stabilizing earnings in Italy next year and returning the operator to growth in 2017.

Telecom Italia's domestic-market EBITDA fell by 9.6%, to €7 billion ($7.5 billion), in 2014.

Sky sees the tie-up with Telecom Italia as a means of extending its service into homes that cannot use satellite technology because of building restrictions.

"This agreement does carry a strong strategic value for us as it broadens Sky's commercial prospects base," said Andrea Zappia, Sky Italia's CEO. "To understand its importance just think that in the UK almost 20% of households enjoy a pay-TV offer through cable or broadband."

Besides being the pay-TV market leader, Sky's UK business has also built the country's second-biggest broadband operation by renting infrastructure and capacity from fixed-line telecom incumbent BT.

In its 2014 annual report, 21st Century Fox indicated that around 4.73 million Italian households were receiving Sky's satellite service as of June that year, representing about 20% of Italy's population.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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