- Sees opening as Italian users aren’t locked in to contracts
- Carrier confident it can attract customers with lower prices
Xavier Niel’s Iliad SA aims to grab 10 percent to 15 percent of the Italian mobile-phone market by applying the same budget tactics that helped it shake up the French industry, according to people familiar with the plans.
Iliad is poised to become Italy’s fourth mobile carrier after buying assets from CK Hutchison Holdings Ltd. and VimpelCom Ltd. as they merge their Italian operations. Rather than making a costly investment building out shops like existing operators in Italy, Iliad will sell online, like it does in France, said the people, who asked not to be named because the plans aren’t public.
“The launch of mobile operations in Italy is a potential source of value creation for Iliad with limited downside,” Societe Generale analysts led by Stephane Schlatter said in a note this month. “There is space for Iliad to be attractive” in Italy.
To succeed, Iliad has to convince Italian consumers who now rely heavily on prepaid plans purchased from stores to switch to shopping on the internet. Iliad sees an opening -- users typically aren’t locked in with a specific carrier, making it easier for them to move to another.
Telecom Italia SpA and Vodafone Group Plc, current market leaders in Italy, stand to lose the most from Iliad’s entry, “particularly if it applies an aggressive pricing strategy, as happened in France,” Eric Beaudet, an analyst at Natixis, said in a note this month.
Iliad managers are confident they can offer lower prices than their rivals in the already cutthroat Italian market, mimicking a strategy that has helped the company’s Free mobile-phone service capture 17 percent of the French market since its start in 2012, said the people.
Italy’s anti-terrorism laws require physical recognition of the buyer of SIM cards online.
Iliad may be ready to start its service in Italy early next summer, one of the people said. The company is considering offering fixed-line services later on, another person said.
An Iliad representative declined to comment.
Iliad shook up the French market with wireless packages starting at 2 euros ($2.25) a month and targeted discounts, for example holiday sales campaigns and back-to-school promotions. In June, the carrier offered free calls, text messages and up to 50 gigabytes of data for free for the first six months.
The Italian telecom market is worth about 30 billion euros a year, with prepaid contracts accounting for about 80 percent of subscriptions, Iliad said in presentation to investors in August. The company said that it targets break-even based on earnings before interest, taxes, depreciation and amortization with a market share below 10 percent.
Iliad “has the know-how and expertise to operate, invest and innovate in the Italian market," European Union regulators said this month when approving the deal enabling the carrier’s entry to the country. Iliad will be able to buy spectrum in different frequency bands and purchase or share several thousand mobile base-station sites. Iliad also gets to use the Hutchison-VimpelCom network until it rolls out its own.