Shareholders approve Italian broadband merger

Shareholders of Italian broadband providers Tiscali and Linkem have approved their merger plan, paving the way for completion of the deal later this year.

The two companies – both relatively small, but far from insignificant service providers – announced their proposed tie-up late last year with a view to both boosting their combined market position and positioning themselves to take full advantage of Italy’s post-Covid national recovery plan.

In the companies’ own words, “the purpose of the transaction is to exploit the market and development opportunities associated with the implementation of the PNRR through the provision of fixed, mobile, 5G, cloud and smart city services dedicated to households, businesses and public administrations.” The broad EU-backed PNRR, or in English the National Recovery and Resilience Plan, will see Italy allocate €6.7 billion in funding for various broadband technologies, alongside many other initiatives.

When the telcos announced the shareholder green light on Tuesday, their focus was very much on the market though.

“The new Tiscali is born,” they declared. “It will be the fifth operator in the Italian fixed market and the first operator in the segment of ultrabroadband access in FWA + FTTH technologies.”

That last point requires some clarification.

The merged entity will have an ultrabroadband market share of 19.4%, it says, citing regulator AGCOM. But put simply, the new Tiscali is leaning very heavily on fixed wireless to justify its ‘market leader’ claims.

AGCOM’s data for September 2021 shows that Linkem leads the Italian market on FWA with a 38.2% share, despite losing almost eight percentage points over 12 months. Tiscali ranks fifth with 2.2%. But the retail FTTH market is, of course, dominated by the big guns with Fastweb, Vodafone, WindTre and TIM – in that order – together serving almost 91% of the market. Tiscali again ranks fifth with 5%.

So for all its hype over market position, the new Tiscali isn’t gaining a huge amount, aside from Linkem’s FWA assets, which number around 640,000 accesses.

And while the merged entity focuses its attention on securing PNRR funding, the battle will continue to rage for fibre dominance amongst its larger rivals, against an ongoing background of uncertainty as to the future shape of the market.

April marks a year since the formal creation of TIM’s FiberCop business, which has been signing up customers apace in recent months. Earlier this month it revealed that in 2021 it generated revenues of close to €1 billion and €852.44 million in earnings, while noting that wholesale rival Open Fiber’s turnover came in at €380 million last year with EBITDA of €152 million. The numbers appear to be available as a result of the start of talks between TIM and shareholder CDP Equity – which also holds a majority stake in Open Fiber – about the possible integration of the two businesses.

The single network plan is still on. Should it come to fruition, competition in the retail FTTH market should remain intense… presuming the right checks and balances are applied to the merged wholesale network, of course.

For its part, Tiscali has committed to using and investing in FiberCop, but has not taken an equity stake in the business. For the moment, it’s all about getting its Linkem merger deal over the line.

The companies are shooting for completion round about mid-year, subject to satisfying certain regulatory and other conditions. The deal itself is complex, but ultimately will see Linkem subsumed into Tiscali, and indications are that the merged entity will retain the Tiscali brand. All of which means there will be little obvious change to the Italian broadband market… unless you happen to be fixed wireless user.

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