Vodafone Italy-Fastweb: the collapse of profitability and the need for aggregations pushed the merger
Fastweb buys Vodafone Italia for 8 billion. The news, awaited and announced, is now official and confirms how the world of telecommunications has entered the era of large aggregations. The plethora of operators currently active (28) will necessarily have to be reduced due to a mechanism that has drastically reduced margins thanks to increasingly lower tariffs and increasingly higher data and phone call thresholds. Thus, the news of the acquisition of Vodafone Italia should not surprise anyone, but rather it must invite deeper reflection.
According to the latest edition of the Report on the Telecommunications Supply Chain in Italy 2023 edition, presented in November by Asstel-Assoteconomia, 2022 was once again a year of growth for data traffic volumes (+10% for fixed data traffic, +31% for mobile data traffic), but also a further worsening of the sector's revenues, which fell to 27.1 billion (-0.8 billion euros), the lowest value ever, also due to a hyper-competitive context which led to a further drop in prices. Overall, from 2010 to 2022, revenues recorded a decline of 35%:mobile radio -44%, fixed communications -26%. An even more alarming fact is that the ratio between gross margin and investments is negative for the first time 3.8 billion, while in 2010 it exceeded 10 billion. A disaster that requires deep reflection.
If the choice of Pietro Labriola and Tim to sell the network is understandable because it involves a series of ancillary investments that are no longer sustainable, it remains to understand how to make the most of those services that will sprout thanks to the network. As often happens, it is not so much the retail segment that needs to be looked at with interest, but rather the business one, with the various clouds and data storage that allow a recovery of margins. Amazon teaches that this is the truly fruitful segment, while the normal sale of services remains a business with very low margins, to say the least.
Speaking of Tim, now that the French of Vivendi have closed the 2023 budget with a profit despite devaluing their share, they can afford more serene reflections. The 4 billion spent to acquire 23.75% of the former Telecom would today be sufficient – at stock market values - to buy it all. But Vincent Bollorè even took steps to cut the book value of the shares to 0.21, in order to avoid other nasty surprises. In recent days, news has circulated of a possible interest in Iliad to take over a share – or all – of the SerCo that will be created after the split of the network.
Benedetto Levi himself, in an interview with Affaritaliani almost two years ago, declared that he was watching Tim's moves with interest. Whether this could then translate into an acquisition is more than premature to say. But there is a detail that must be observed carefully. Just in the summer of 2022, Iliad itself had offered 11.25 billion for Vodafone Italia's activities, receiving a “no thanks” as a response. Today, however, the English agree to sell to Fastweb for a much lower sum in order to obtain immediate cash. Few, damned and immediately said an old adage: because the offer is cash and “ready to pay”.
And the reason is easy to say: in two years Vodafone Italia's profitability has reduced. And the feeling is that in a world in which voice and data traffic is now to all intents and purposes a commodity, there are two paths: either we invent extremely high-value accessory services, or we proceed with a drastic reduction in the number of operators. The impression, a bit like in the banking world, is that the second path is the one that can be followed in the right way faster and less problematic.
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