Telecom Italia Mobile S.p.A. - Company Profile, Information, Business Description, History, Background Information on Telecom Italia Mobile S.p.A.



Via Luigi Rizzo 22
Roma
I-00136
Italy

History of Telecom Italia Mobile S.p.A.

Telecom Italia Mobile S.p.A., or TIM, is not only Italy's leading mobile communications company--with more than 26 million lines in Italy alone, it is also the largest mobile telecommunications group in Europe. In Italy, the company remains the dominant mobile player, in a market that, with more than 97 percent penetration, has achieved one of the world's highest subscriber rates in the world. Yet TIM has positioned itself as an international mobile telephony provider, targeting in particular the Mediterranean basin and the South American markets. The company's foreign operations are focused especially on Brazil, where the company holds stakes in Brasil Telecom and two other mobile telephone providers, as well as its own mobile telephone license for a 16-state area. Other South American markets for the company include Venezuela, Chile, and Peru. In Europe, TIM holds more than 81 percent of Stet Hellas, which won one of Greece's high-speed UTMS licenses. In 2003, TIM merged its share of the IsTIM joint venture with Turk Telecom's Aycell, giving it 20 percent of one of Turkey's largest mobile telephone companies. TIM is also present in the Czech Republic. TIM's international operation adds nearly 20 million more subscriber lines to its customer base. The company has joined The Netherlands' KPN and Japan's NTT DoCoMo, to roll out the DoCoMo mobile Internet platform. At the same time, TIM is part of a pan-European alliance, including Orange, T-Mobile, and Telefonica Moviles, which together controls more than 170 million subscriber lines throughout Europe.

Mobile Telephone Spinoff in the Mid-1990s

The problems that long plagued the Italian fixed-line telephone sector prepared the country for the mobile telephone revolution of the 1990s. After decades of industry fragmentation, lagging technology, high taxes, government corruption, and anemic investment, the Italian phone system was in disarray. For much of its history, the Italian telephone sector had been dominated by the STET (Societa Italiana L Esercizio Telecom), established by the Mussolini government in the 1930s.

STET had grown into a vast conglomerate during the 1960s and 1970s, with operations from telecommunications to satellite and data communications. The state-owned company later developed into a five-headed organization: SIP, which controlled domestic telecommunications; Iritel, which handled long-distance services; Italcable, which controlled international long-distance connections; Telespazio, governing satellite communications; and SIRM, for maritime communications. STET itself came under control of the Institute for Industrial Reconstruction, the government-run organization that controlled most of Italy's industrial economy.

In the late 1980s and early 1990s, most of Europe began preparing for the abolition of trade barriers within the European Union (EU), slated for 1992, and the ultimate emergence of a single monetary unit, the euro, scheduled to be completed in 2001. The liberalization of a number of sectors, including the energy, utility, and telecommunications markets, formed a key feature of the trade reforms enacted by the EU. Telecommunications, viewed as a strategic industry, had long been dominated by government-run monopolies in each market. Yet by the mid-1990s, nearly all European countries had begun the process of privatization and deregulation.

Italy's planned telecommunications deregulation became mired in a series of delays, but finally resulted in the merger of the five state-owned telecommunications companies operated by STET into a new, unified body, Telecom Italia. That company nonetheless retained its near-monopoly on the country's telecommunications network. In particular, Telecom Italia controlled all of the country's mobile telephone network.

Italy had begun developing its mobile telephone services in the early 1990s. That service, run by SIP, had been launched in 1990. Based on the TACS analogue network, the mobile telephone service benefited from the widespread problems in the fixed-line sector--where long waiting times for telephone lines, high prices, and intermittent service remained problems into the 1990s. Whereas mobile telephony operations represented a relatively minor part of most markets, serving chiefly the corporate sector, the Italian market proved fertile ground for its early and massive adoption. At the same time, the company recognized the need for competitive rates. Already in 1993, the company launched an innovative Family rate.

Telecom Italia spun off its fast-growing mobile telephone business as a separate, publicly listed company in 1995, reducing its holding to just 60 percent. The new company, Telecom Italia Mobile, or TIM, retained a near monopoly on the Italian mobile telephone market. Indeed, into the middle of the decade, the sector had operated without even a licensing system, remaining entirely controlled by the government's telecommunications company. Complaints about the government's monopolistic policies led to the opening of the market in the later part of the decade, with the country's first nongovernment mobile telephone license granted to Olivetti subsidiary Omnitel Pronto Italia.

By then, the European Market countries had agreed on a new mobile telephony standard, GSM, in an effort to create a single European-wide technology standard. TIM adopted the GSM standard in 1995. The improvements in technology offered by the new standards were to lead to the first great boom in consumer demand across Europe at the end of the decade. TIM's large subscriber base placed Italy at the forefront of this trend. The success of the new digital standard--which enabled, among other features, a drastic reduction in the size of the telephone units themselves--was particularly evident in the mobile telephony penetration rate across Italy. By the turn of the century, more than 90 percent of the consumer market already owned a mobile telephone.



TIM continued to innovate into the dawn of the 21st century. In 1996, the company launched a new prepaid, rechargeable phone card. The new service was an instant hit, winning over the large consumer segment that had been unwilling or unable to commit to a subscription-based service. Less than six months later, the company had already sold more than one million cards. From 5.7 million subscribers at the end of 1996, the company's base leapt to more than nine million by the end of 1997, making it Europe's largest mobile telephone operator.

International Mobile Telephony Leader in the 21st Century

By the end of 1998, TIM counted more than 14 million subscriber lines under its control. The company had managed to head off competition from Omnitel Pronto, which launched its own service at the beginning of 1997, in part by launching new high-use pricing packages. The company also continued to innovate, such as its launch of short messaging service (SMS) capability in 1997. That technology, akin to e-mail, quickly became a primary driving force behind cellular phone adoption. At the same time, the company benefited from the delay in awarding a third mobile telephone license (later awarded to WIND).

TIM began preparing for the highly touted next generation of mobile telephones at the end of the 1990s. The company began implementing services based on WAP (Wireless Access Protocol) technology, offering a limited form of Internet access through telephone handsets, in 1999. The following year, TIM won one of Italy's high-speed UTMS licenses, and began preparing its own rollout of the so-called 3G technology.

While parent Telecom Italia was battling--ultimately unsuccessfully--the hostile takeover attempt by Olivetti, TIM began plotting its future expansion. With its growth in Italy more or less assured--the company topped 26 million subscriber lines at home in 2003--TIM's attention turned to the international market. In 1999, the company integrated its own network into the European mobile system, and the company began seeking alliances with other European groups. As part of that effort, also, TIM began acquiring minority stakes in a number of European companies, such as Bouygues in France, Auna in Spain, and Mobilkom in Austria (Mobilkom).

One of TIM's main expansion targets became the Mediterranean basin. In 2000, the company joined with Turkish bank Isbank to win a mobile phone license for that country. The partners then launched the IsTIM mobile phone service. The company also entered Greece, taking a stake in Stet Hellas, backing its bid for a UTMS license there. TIM continued to increase its stake in Stet Hellas, acquiring more than 80 percent by the end of 2003.

In the meantime, the company had turned its attention to the fast-growing South American market, then actively undergoing its own deregulation process at the beginning of the 21st century. In late 2000, TIM bought a controlling share of Venezuela's Digitel, the country's third largest mobile phone provider. Although Digitel had just 110,000 subscribers, its coverage area included Caracas, giving TIM access to expansion in the capital city. The company then began negotiating for stakes in two other regional mobile phone operators in order to establish a national footprint in Venezuela.

TIM now focused on the lucrative Brazilian market, acquiring a license to launch a mobile service in two southern states. That service, called Tele Celular Sul, came online by the end of 2000. By the beginning of 2001, TIM decided to move more aggressively into the Brazilian market. In February of that year, TIM paid BRL 1.5 billion ($778 million) to acquire two regional licenses covering 15 states--including the highly prized Sao Paulo state. As part of that agreement, TIM agreed to sell off Tele Celular Sul. Instead, the company announced its intention to spend as much as BRL 3 billion ($1.5 billion) implementing its two new mobile networks.

TIM continued building out its Brazilian operations, and in 2002 the company began offering national coverage. The company meanwhile had continued its South American expansion, launching mobile services in Peru in 2001. By the end of its first full year, the company had succeeded in attracting nearly 200,000 customers--a number that passed 500,000 in 2003. TIM stepped up its investment in that market, achieving national penetration by the beginning of 2004.

By then, TIM had revised its growth strategy, focusing on the Mediterranean and South American markets. As such, the company sold off its minority stakes in Europe, and instead concentrated on forming strategic alliances with other major telecommunications players. As part of that effort, TIM joined an alliance with The Netherlands' KPN Telecom and Japan's NTT DoCoMo to roll out NTT's third-generation DoCoMo service in Europe. The company also joined with Orange, T-Mobile, and Telefonica Moviles, in an alliance that together controlled more than 170 million subscriber lines throughout Europe.

Rollout of UTMS service hit a snag across Europe as the telecommunications market collapsed in the early 2000s. Nonetheless, TIM maintained its level of investment, and despite setbacks--including postponing its launch for more than a year--the company became one of the first to implement the new high-speed system in a soft launch at the end of 2003. Although the full-scale launch was slated only for 2004, TIM provided a taste of the mobile telephony market of the future when it debuted a live television service adapted to the tiny mobile telephone screen in October 2003.

Meanwhile, TIM continued its expansion. In 2003, the company took control of Italy's Blu, the failing holder of the country's fourth mobile telephone license. At the beginning of 2004, TIM increased its position in Turkey, when it agreed to merge IsTIM with Turk Telekom's Aycell. Following the merger, TIM's share of the new company, trading under the Aria and Aycell brands, stood at 40 percent. The merger added some 4.5 million customers to TIM's international base of 43 million. Now the world's largest mobile telephone provider, TIM had taken the industry driver's seat at the beginning of the 21st century.

Principal Subsidiaries: Tele Celular Sul Participaçoes S.A. (Brazil).

Principal Competitors: Verizon Communications Inc.; Siemens AG; Sumitomo Corporation; Turk Telekomunikasyon End A.S.; Vivendi Universal S.A.; France Telecom S.A.; SBC Communications Inc.; Telefonica S.A.

Chronology

Additional Details

Further Reference

User Contributions:

Comment about this article, ask questions, or add new information about this topic: