Vodafone Italia and TIM join the network sharing bonanza

Vodafone’s Italian business and Telecom Italia are the latest pair to join the sharing euphoria which seems to be sweeping the Vodafone group.

After network sharing agreements were signed in Spain with Orange and O2 in the UK, Vodafone has swept across to Italy to join forces with market leader, albeit a stressed business currently, Telecom Italia.

“This agreement will enable us to step up the rollout of 5G for the benefit of our customers and the community as a whole,” said Aldo Bisio, CEO of Vodafone Italia. “5G has a key role to play in modernising the country.

“It will provide the technology platform from which to launch innovative new services capable of making business models more efficient and improving productivity throughout the value chain, helping to build a more competitive digital economy. Network sharing reaps the benefits of 5G and at the same time reduces the impact on the environment and lowers rollout costs, allowing more investment in services for customer.”

This announcement actually has two components to it. Firstly, in pursuit of an accelerated 5G deployment plan, Vodafone Italia and TIM will enter into a network sharing partnership which will include active equipment. Secondly, the Vodafone passive tower business will be merged with INWIT, TIM’s own tower business.

Starting with the first component, once again Vodafone has decided to go down the route of sharing active equipment. This was the case when pooling resources in the UK with O2, though it is a slightly unusual approach as the only differentiator now is the spectrum which the duo has acquired individually. However, like the UK the larger cities will be excluded from the network sharing partnership.

Although sharing active equipment has been viewed as relatively unusual in the past, perhaps this is an indication of Vodafone’s position in both of these markets. In the UK, it is sitting firmly in third place in the market share rankings with a lot of ground to make up, while in Italy there are financial pressures thanks to the pricing disruption of Iliad. In both cases, Vodafone will welcome opportunities to free-up cash.

Using this approach, Vodafone suggests it will be able to free-up €800 million over the next 10 years which will certainly be useful for other R&D or reallocating for customer acquisition efforts.

The second aspect of this deal will see the Vodafone Italia tower business merge with TIM’s INWIT, with Vodafone taking a 37.5% and a lump sum of just over €2 billion. What we’re not too sure about is how this will impact the potential spin-off of Vodafone’s tower business in the future.

This was an announcement which got investors excited last week, as Group CEO Nick Read suggested monetizing the tower infrastructure business alongside declining revenues for the latest quarterly statement. This seemed to have forced a positive reaction from the market, though presumably any Italian assets would now have to be excluded from a European-scaled tower infrastructure business.

TIM hits the 5G go-button

Telecom Italia is the latest telco to join the 5G bonanza, announcing launch of its own network in Turin, Naples and Rome.

The launch is limited for the moment, though it seems TIM is confident it can scale very quickly. By the end of the year, an additional six cities (Milan, Bologna, Verona, Florence, Matera and Bari) will be added to the list, as well as 30 tourist destinations, 50 industrial districts and 30 specific projects for big business.

By 2021, TIM has set itself further ambitious targets; coverage for 120 major cities, 200 tourist destinations, 245 industrial districts and 200 specific projects for big business. The dreaded ‘up-to’ metric has also made an appearance, with speeds ‘up to’ 2 Gbps promised by the end of the year, progressing to 10 Gbps by 2021, when it is also promising 22% population coverage for 5G.

What hasn’t been detailed is the number of base stations which will be upgraded to 5G over the coming months and years. It’s all well and good to ‘have’ 5G in Turin, Naples and Rome, but without knowing the number of base stations which are 5G there is little way to gauge the coverage footprint. It might end up meaning very little unless you are stood in the perfect spot just outside the entrance to Vatican City.

Onto pricing, TIM has elected to take the SIM-only approach, with the option to bolt on a subsidised handset as an additional product. For €29.99 a month, users will have a data allowance of 50 GB, with unlimited calls and SMS, while the data pool is increased to 100 GB for €49.99 a month.

Interestingly enough, the most attractive offers which we have seen around the world for 5G have been SIM-only plans. Vodafone in the UK has taken this approach, while T-Mobile US has done the same also. Telcos have wanted to distance themselves from the profit churning subsidised handset model for years and perhaps this is further evidence of this. Whether a SIM-only approach to 5G, with optional bolt-ons for subsidised handsets, becomes a defining trend, only time will tell.

Another excellent move from TIM is the roaming. Although there are few telcos who have announced roaming plans, Vodafone is one of the only ones to do so, TIM has suggested it will offer 5G roaming in six countries, starting within July in Austria, the UK and Switzerland and moving on to Spain, Germany and the UAE soon after.

The announcements are coming think and fast as we move closer to the 5G dream, but this looks like one of the more comprehensive ones to date.

Q&A with Elisabetta Romano, CTO at TIM

Elisabetta Romano is Chief Technology and Innovation Officer for TIM and is responsible for ensuring TIM’s technological innovation, the evolution of the networks, and for the Information Technology required to support TIM’s digitization process at Group level. The 5G World team interviewed Elisabetta ahead of the show to gain a sneak peek for what we can expect at our upcoming conference.

TIM invested 2.39 billion euros on 5G spectrum in late 2018 for expansion of mobile network. Why has TIM invested heavily on spectrum? What monetisation opportunities does TIM expect from 5G?

Spectrum is one of the key assets for telco operators.  Through such investment, TIM has secured both the best coverage – with the 700 MHz bandwidth – and the highest speeds through higher bandwidths such as the 3.6 GHz and the 28 GHz, necessary to provide specific services. Business and consumer use cases are increasing every day: constantly growing mobile traffic, increasing demand of dedicated networks for industry automation, and we are seeing the first requirements for guided vehicles both in private spaces or in smart cities.

‘TIM has done a lot of tests on SMART cities, industry 4.0, entertainment, public safety etc sectors’

What new (5G) enterprise services should we expect TIM to bring to market, and why?

Since the beginning of the trials, we have had more than 70 partners in Turin, San Marino, Bari and Matera, including private big and small enterprises, P.A., universities and research centres. I believe that the industrial sector will have the greatest demand first. IoT services, particularly security and video surveillance, will also benefit from the upcoming development of 5G.

What do you expect the consumer pick up of 5G products and services will be? What services should TIM consumers expect?

Of course, ultra-broadband Internet access will be one of the key services.  As we know, video is one of the main traffic drivers, video services like our TIMVISION are growing, also sports events are growing in terms of consumption via the Internet, particularly when on the move.  This said, the availability of new devices and particularly of 5G smartphones is crucial for the consumer segment.

What are the main (market, technology, business, regulatory or other) challenges in achieving 5G rollout and what needs to be done to further unlock innovation in the telecoms industry (globally, in Europe or Italy)?

5G is a ground-breaking technology, which will need several factors being coordinated in order to have a quick deployment. The regulatory framework in Italy is challenging, for example, because of very low EMC limits in comparison to other European countries. Also, the financial commitment is demanding, first to acquire the spectrum, then to roll out the technology, which means that the operators will need to find innovative approaches to infrastructure development.  Then there are the new devices that need to be tested.  Last but not least, 5G demands a new approach in developing the network function and core network: cloud-native microservice based architecture with strong API exposure to enable a rich ecosystem of developers and business partners, is by itself a challenging effort.

You will be delivering a Keynote speech at the 5G World (11-13 June 2019, Excel, London). Could you give us a sneak peek of what our audience should expect to hear from you and what are you looking forward to at the Forum?

I don’t want to reveal too much. I can tell you I will describe our trial experience and how we are working to make 5G real a business development platform, with a new cloud-native architecture that leverages AI and extensive API for both internal to the company and external, open ecosystem development.

It’s your chance to hear from Elisabetta Romano directly at 5G World 2019 which is taking place on 11-13 June, at the ExCeL in London. Register now as a free visitor to join us at the largest 5G show featuring 30+ hours of free content delivered by CxO telco executives like Elisabetta

Vivendi conditionally concedes defeat in TIM board battle

French conglomerate Vivendi withdrew its bid to replace five TIM board members at the 11th hour but doesn’t seem happy about it.

TIM shareholders were due to vote on Vivendi’s request to replace those board members it had identified as acting in bad faith last Friday. But at the meeting itself TIM CEO Luigi Gubitosi apparently had one last attempt to get Vivendi to back down and, amazingly, it did. Presumably it had realised it wasn’t going to win the vote and not to have it rather than suffer a humiliating defeat.

Here’s what Caroline Le Masne de Chermont, Vivendi Group Head of Legal Affairs (why do Vivendi execs all sound like aristocrats?), had to say at the meeting:

“As extensively expressed in our request, we asked the shareholders to vote for a change of governance, because what happened in and around the Board since last May has affected the stock price, and the whole functioning of the company.

“However, there is no point in revisiting here and now the events of the last year, particularly those that cannot be changed. Let’s focus instead on the changes we would like to see in the near future. Vivendi wishes TIM’s board to be more reflective of the company’s shareholder base and to be led in an independent, transparent and fully inclusive manner.

“To conclude, we are prepared to give credit to the CEO. Accordingly, following his suggestion, Vivendi has decided not to pursue today its proposal to revoke and replace five Board members, provided that this has the support of the shareholders’ meeting.

“What needs to occur next, may at this stage be left in the hands of the Board members and their individual conscience. What we can say is that if change does occur as the CEO announced, he can count on our loyal and stable support as the company’s largest shareholder.”

Essentially Vivendi seems to be conceding defeat, for now, in its battle to control the TIM board, but reserves the right to kick off again if the current board doesn’t start raising its game sharpish. Vivendi has presumably realised its open hostility to the TIM board isn’t a great look and its sudden conciliatory stance about letting bygones be bygones is just hilarious.

In response Elliott issued the following statement: “Elliott welcomes Vivendi’s decision to withdraw its request to shareholders to revoke five of TIM’s Directors, a clear sign that Vivendi understands that there is broad support for TIMs existing independent Board.

“This outcome is a victory for the company and paves the way for stability and sustained value creation for all of TIM’s stakeholders. Elliott remains fully supportive of CEO Luigi Gubitosi, the Company’s management team and the existing independent Board, and looks forward to constructive dialogue with all stakeholders to pursue a value maximising path forward for the company.”

Gubitosi himself apparently struck a cautiously conciliatory tone, calling the move courageous and a first step towards peace. TIM shareholders will presumably be happy that this period of corporate turmoil has been concluded, although shares were only up a few percent on Friday. Maybe this muted optimism was a consequence of the veiled threats contained within Vivendi’s climb-down. It may have exhausted this strategy but this is unlikely to be the last time Vivendi clashes with Elliot over TIM.

América Móvil strengthens its position in Brazil with Nextel acquisition

The Latin American mobile heavyweight América Móvil has agreed to acquire its competitor Nextel in the Brazilian market for $905 million.

Shortly after the deal was announced by América Móvil on Monday, and the board of NII Holdings, which owns 70% of Nextel, announced that it would propose to the shareholders to accept the offer. The other 30% of Nextel is owned by AI Brazil Holdings, the local operation of Access Industries, an American private company whose portfolio includes natural resources, telecoms, internet services, as well as Warner Music, among other media interests.

The nature of the deal, “cash free / debt free”, will let NII and AI Brazil keep all the cash while América Móvil will not assume Nextel’s debts. Although the total transaction value is less than 1.5 times of Nextel’s annual revenues in 2018 ($621 million), it represents almost four times NII’s market capitalisation on its latest trading day on NASDAQ ($229 million), indicating the buyer’s relatively strong confidence in the business prospect.

Brazil is a highly competitive market. According to research by Ovum, by Q4 2018, Vivo (owned by Telefónica) led with one third of the total mobile market, while TIM and Claro (América Móvil’s existing operation in Brazil) were vying for the second place, each serving about a quarter of the total mobile subscribers. Nextel had slightly over 1% market share. The rest of the market is served by Oi (a JV between Altice Portugal, formerly Portugal Telecom, and Telemar, Brazil’s largest integrated telecom operator).

After the acquisition, América Móvil plans to combine Nextel with Claro to “consolidate its position as one of the leading telecommunication service providers in Brazil, strengthening itsmobile network capacity, spectrum portfolio, subscriber base, coverage and quality, particularly in the cities of São Paulo and Rio de Janeiro, the main markets in Brazil.”

For NII, selling Nextel in Brazil represents the end of an era. The company once operated mobile services in multiple North and Latin American markets, including the eponymous professional radio service in the US, which was later acquired by Sprint. Brazil is its last operation, where it has been struggling in a classic four-operator market. Not only has it not been able to break into the leader group, but also seen business declining fast. The revenues in 2018 were a 29% decline from 2017 ($871 million), which itself was a 12% decline from 2016 ($985 million).

“The announcement of this transaction marks the culmination of an extensive multi-year process to pursue a strategic path for Nextel Brazil and provides our best opportunity to monetize our remaining operating assets in light of the competitive landscape in Brazil and long-term need to raise significant capital to fund business operations, debt service and capital expenditures necessary to remain competitive in the future,” said Dan Freiman, NII’s CFO. Earlier potential buyers included Telefónica Brasil, Access Industries (NII’s JV partner), though the most concrete case was TIM, which, according to Reuters, approved a non-binding offer in November last year. None of these negotiations has come to fruition.

“Management and our Board of Directors believe the transaction is in the best interest of NII’s stockholders,” Freiman added.

Vivendi denounces TIM board

The emotional level of the custody battle for TIM has reached a new pitch, with Vivendi starting to lose its composure.

“Vivendi denounces the behaviour of the Elliott-nominated Telecom Italia (TIM) Board members who yesterday rejected by a majority vote the report issued by the company’s Board of Statutory Auditors, a totally independent body, citing serious irregularities related to the company’s governance and its Board,” opened Vivendi’s latest salvo, which claimed to be seeking to re-establish the truth.

It was issued in quick response to the TIM board’s own response to Vivendi’s previous moan about a recent auditor’s report – you see how convoluted this is getting. It unsurprisingly thinks the perspective of the TIM board “…fails to mention several acts of serious misconducts by the Chairman and the lead independent director, who did not inform all independent directors in the same manner and were clearly selective in their interactions.”

Here are the questions Vivendi reckons remain unanswered:

  • Why did the Chairman organize the preparatory meeting concerning the dismissal of Amos Genish with the sole participation of the ten Board members designated by Elliott?
  • As widely reported by the Italian press, why did at least one preparatory meeting take place in the presence of only the ten Board members nominated by Elliott prior to the November 18, 2018 Board meeting?
  • Did the Chairman have any contact with any of Elliott’s representatives before or after the Board meetings of the 13th and 18th of November?
  • What was discussed at the meeting between the Chairman and the representatives of at least one minority shareholder that occurred on the 12th of November 2018?
  • What were the criteria used in the selection of the legal advisor for a decision as important as the dismissal of the CEO when it was well known that the same law firm has represented Elliott in the past and even sued TIM in recent months?
  • Does the Chairman believe he still has the confidence of the minority Board members, the Board of Statutory Auditors and the market?
  • Has the Chairman considered stepping down from the Board, in light of the findings of serious breaches in his duties that have emerged from the Report of the Board of Statutory Auditors?

In common with its opponents Vivendi also has a special website for its propaganda in this matter. It wants both the statutory auditors and CONSOB, the Italian securities regulator, to look into this further because it doesn’t think the Elliott-dominated board of TIM can be trusted to ‘self-police’. Ultimately, of course, Vivendi wants to restore its own dominance of the board, because it did such a great job of self-policing last time.

TIM board slaps down Vivendi moans

It took the TIM board a few days to respond to a bunch of accusations thrown at it by Vivendi, but the result was pretty comprehensive.

At the start of the week we reported that the battle between French conglomerate Vivendi and activist investor Elliott for control of Italian operator group TIM had degenerated to the point of resembling an acrimonious custody battle. The latest initiative from Vivendi was to accuse the TIM board of bad behaviour and state that this was the result of it being dominated by Elliott nominees.

That same board has now responded, laying out six Vivendi accusations and addressing each one at considerable length. We’re not going to lie to you, dear reader, the response is far from being a riveting read. But such is our devotion to duty here at Telecoms.com that we’ve digested the essence so you don’t have to. Italics denotes a direct copy from the document and regular font denotes our summaries of the TIM response.

Essentially, according to shareholder Vivendi and Mr de Puyfontaine, the Board is alleged to have:

(i) executed an unwarranted impairment test process which allegedly resulted in an equally unwarranted writedown of goodwill for a grand total of 2 billion euros in the interim report on operations at 30 September 2018;

  • The reasons for this have already been published and the process was signed off by loads of expert third parties. Furthermore the decision was overwhelmingly approved by the board, including Amos Genish.

(ii) utilised the circumstances that led to the impairment to revoke the powers assigned to Mr Amos Genish;

  • He was doing a rubbish job and there’s loads of evidence to prove it.

(iii) breached the rules of governance in the process that led to the aforementioned revocation;

  • He was doing such a rubbish job that we couldn’t waste any time in replacing him as CEO.

(iv) breached the rules of governance in the process whereby powers were attributed to Mr Luigi Gubitosi;

  • See previous answer.

(v) breached the current regulations on the occasion of Vivendi’s request for a TIM shareholders’ meeting to be called to:

(a) appoint the external auditors for the period 2019-2027;

(b) revoke the mandates of five directors, in the persons of Fulvio Conti, Alfredo Altavilla, Massimo Ferrari, Dante Roscini and Paola Giannotti de Ponti, and

(c) appoint five Directors, in the persons of Franco Bernabè, Rob van der Valk, Flavia Mazzarella, Gabriele Galateri di Genola and Francesco Vatalaro, to replace those whose mandates were revoked;

  • We already addressed this. Everything was done by the book and loads of experts will back us up on that.

(vi) breached current law on the occasion of the announcement to the market of preliminary 2018 results below the consensus and prudent estimates for the first half of 2019, allegedly thus causing a fall in the share price, as well as a loss of trust among investors.

  • On the contrary the law obliged us to make that announcement.

The response concludes by noting, as it was bound to, that Vivendi’s accusations are groundless and everything the board’s actions have been exemplary and beyond reproach. Vivendi can’t have expected anything else, but at least it forced the board to explain itself fully ahead of the shareholder meeting at the end of this month. It will presumably spend the intervening time picking holes in it.

The custody battle for TIM between Vivendi and Elliott gets personal

Vivendi says a recent TIM auditors report shows dodgy behaviour from Elliott, which in turn reckons Vivendi is a negative influence on the company.

Every new phase of the battle for control of Italian operator group TIM (the artist formerly known as Telecom Italia) is increasingly taking on the characteristics of an acrimonious custody fight. Each party takes turns in publishing claims of what a bad parent the other is, while at the same time insisting that it only wants what’s best for tiny TIM.

The latest salvo from Vivendi is a press release responding to a recently-published statutory auditors report (only in Italian, as far as we can tell)The release is headlined: ‘The irregularities in governance at Telecom Italia revealed by the Statutory Auditors report reinforce Vivendi’s position to request a return to a more balanced Board of Directors,’ which is consistent with pretty much all of Vivendi’s public statements on the matter since it lost control of the TIM board to Elliott last year.

“Vivendi is extremely concerned by the outcome of the Telecom Italia Statutory Auditors report released today confirming the existence of serious irregularities related to the governance of the company and its Board of Directors of which a majority of members are from the Elliott list,” opens the body copy. “This report reveals that the Chairman of the TIM Board violated corporate laws as well as the most basic, fundamental governance rules.”

It goes on to note the apparent existence of a ‘shadow board of directors’ consisting of just the Elliott-nominated ones, and says the auditor’s report reveals evidence that privileged information had been leaked to third parties prior to a previous board meeting. It doesn’t say who may have leaked that information but obviously Vivendi thinks it was someone affiliated to Elliott. All this goes to show how important it is that the shareholders get rid of some Elliott-nominated board members at a meeting on 29 March, according to Vivendi.

Elliott doesn’t seem to have directly addressed the Vivendi press release, but did publish one of its own this morning, merely entitled ‘Elliott statement on Telecom Italia’. Aside from dead-naming the company, the point of the release is to address the shareholder meeting and implore them not to replace any Elliott-nominated board members with fresh Vivendi ones.

Elliott believes Vivendi’s nominees are unsupportable, lack true independence, and would simply return control to a group with demonstrable conflicts of interest, related party transactions and a history of undermining TIM shareholders,” said the Elliott release.

“Elliott believes it is time to give TIM and its independent Board stability and space to implement its strategy, to achieve much-needed reform and to deliver sustainable shareholder value. It is time for TIM to shake off the damaging management of the past and reaffirm its decision to move confidently into the future. It is time for TIM, in the words of its new CEO, to become a “normal company.”

To support its position Elliott has published a presentation that can be accessed through a special website called time-for-tim.com (do you see what they did there?). The 40-page (yes, 40) presentation provides an exhaustive list of reasons why Elliott is great and Vivendi is rubbish, a lot of which amounts to an attack on French conglomerate Bolloré Group, which is the dominant shareholder at Vivendi, and which Elliott apparently suspects of nefarious motives.

We have seen nothing to make us pick one side over the other in this dispute. They both seem to want control of TIM to further their own ambitions, whether it’s short-term profit-taking or as a small part of a broader long-term strategy. Both are someone disingenuously claiming to only have the best interests of TIM at heart, but if we had a vote at the shareholder meeting we’d be tempted to get rid of both of them, if that were an option. TIM declined to comment when we contacted it.

TIM and Vodafone Italia sign 5G network sharing pact

Competing Italian MNOs TIM and Vodafone Italia have decided it makes sense to pool their resources when it comes to 5G infrastructure.

Having blown their reserves on the recent 5G spectrum auction, the two have presumably spent the intervening time contemplating awkward concepts like return on investment. Rivals tend not to partner unless they’re so desperate for the return on such a move that it outweighs their instinctive aversion to cooperating with each other.

Hence they have signed one of those rather limp memoranda of understanding, that in this case is a public statement that they’re both up for active network sharing over 5G, but they can also bail out as and when they no longer fancy the idea. Active network sharing involves the actual kit, while passive just means sites, towers, etc.

They already have a passive sharing agreement in place for 4G and that has presumably gone smoothly. So TIM and Vodafone now reckon it may be time to take their relationship to the next level and get active with each other. The main focus of all this activity is 5G but they’re seriously considering extending that to 4G too.

“This partnership will allow our customers to enter the 5G revolution faster and deeper, while at the same time making the best use of both companies’ resources,” said TIM CEO Luigi Gubitosi. “We believe that network sharing is key to do more, effectively and better for the benefit of our clients and all stakeholders, in view of the process of change that will be triggered by the launch of 5G in the years to come and that will be paramount for the development and digitalization of our country.”

“This partnership will allow us to generate significant benefits for our customers and other stakeholders, who will be able to enjoy the best 5G experience, made available in a shorter period of time and across a wider geographical area,” said Aldo Bisio, CEO of Vodafone Italia. “5G represents a technological breakthrough that will have a profound impact on society, and that requires investment, efficiency and a rapid rollout. This has led us to broaden the scope of our existing successful partnership.”

They even have aggressive ambitions for the passive side of things and are contemplating combining the 22,000 towers they collectively own into one company. This wouldn’t be entirely straightforward as TIM’s tower division – Inwit – is partly independently listed so there will be extra scrutiny over the pros and cons of the move.

The announcement coincides with TIM’s full-year 2018 numbers and its announcement of a new cunning plan for the next three years. Revenue growth was flat and the plan is the usual corporate stuff about efficiencies, profit, etc. While partnerships like this have a distinctly defensive feel about them that doesn’t mean they’re a bad idea and if they’re shown to boost the bottom line then everyone’s a winner.