Telecom News

Italian Telco Sector Revival: Tax Breaks, Fiber Transition, and Strategic Investments

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Italy’s Ministry of Enterprise and Made in Italy (Mimit) is said to be working on a legislation that incorporates measures worth almost €1.5 billion to support the nation’s telecoms sector, according to a report seen by Reuters. The proposed legislation would extend an existing energy-related tax break to the telco sector and introduce further tax reductions on energy bills for companies considered to be of national strategic importance, such as network operators.

This combination of tax relief mechanisms could result in savings of up to €1.2 billion for telecom companies until 2025. In addition to the tax breaks, the legislation also considers €200 million in funding to help operators transition their existing copper networks to full fiber, and €145 million to fund early retirement schemes and hire younger replacements.

The relief package is not yet finalized and would require approval from the cabinet. Some measures might also need the green light from the European Commission. The Italian telecoms sector has been struggling for years, most prominently following mobile newcomer Iliad Italia’s entrance in 2018. With reduced mobile service rates, Iliad’s launch ignited an intense price war, resulting in the sector struggling for growth.

Due to these slim profit margins, major changes have occurred in the industry, most significantly affecting Italy’s largest telco, Telecom Italia (TIM). Under new CEO Pietro Labriola, the company is undergoing a strategic shift that separates its infrastructure and service arms, aiming to attract external investment. Currently, investment firm KKR and state-owned lender Cassa Depositi e Prestiti (CDP) are involved in a bidding war to take control of TIM’s would-be-spun-off infrastructure unit, tentatively called NetCo.

Vodafone Italia is also grappling with adverse market conditions as its most recent Group results showed a lackluster performance in Italy. Both TIM and Vodafone announced staff reduction plans in Italy last year as part of broader cost-saving measures. As the telecom industry deals with these challenges, the proposed legislation could provide much-needed support for operators and pave the way for a more competitive environment.

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