Regulators will have to address the issue of excess spectrum when assessing the proposed combination of Wind and 3 Italia, Telecom Italia CEO Marco Patuano said on Friday, but he indicated that he sees no serious hurdle to the deal closing in the next year.
The comments came as Patuano presented the Italian incumbent’s first half results, which showed improvement at its domestic operations, but group net profit took a hit as a result of legal and regulatory provisions.
Patuano has on a number of occasions made it clear that he supports consolidation in the Italian mobile market, which has witnessed a period of intense price competition. However, on Friday he suggested that the impact of the Wind/3 deal – announced on Thursday – will not be as pronounced as it would have once been.
"The environment has already become much more rational, especially in [the] consumer segment," he said. In the business market, though, there are still players that are seeking market share at all cost, he added. "The market can become only more rational."
The chief executive said he will be surprised if Wind and 3 Italia close their merger quickly, predic ting an eight-to-12-month timeframe.
"It will take some time," he said, "[but] I don’t see risks of failure in the process."
The deal will face scrutiny from a number of regulatory angles, including the European Commission’s antitrust body, but similar deals in other markets over the past few years have smoothed the way for M&A approvals.
"[There is an] excess of frequencies in the potential combined entity that [will] have to be discussed," Patuano said, adding that the authorities have several options on how to proceed.
Meanwhile, Patuano put a positive spin on Telecom Italia’s first half results, highlighting a marked improvement at the telco’s domestic operations where revenues and underlying EBITDA continued to tick up quarter on quarter (see chart).
At group level, first half revenues were down by 4% to €10.1 billion, while EBITDA slipped by 16% to €3.6 billion.
Net profit plummeted to €29 million from €543 million a year earlier, in part hit by €399 million in non-recurring charges, comprising €369 million in provision for regulatory and legal risks and €30 million related to employee benefits.
Alongside the results presentation, Patuano also set the record straight on a number of reports circulating in the press.
He confirmed that he has had contact with Telecom Italia’s new biggest shareholder, Vivendi, albeit briefly.
"I met [Vivendi chairman] Mr Puyfontaine…three weeks ago, or something like that," he said. "We didn’t go into very much detail."
He also confirmed that despite a growing trend towards structural separation in Europe, Telecom Italia does not plan to join in.
"We are not targeting a network separation," he said.
