Redundancies in Vodafone
The last to officially declare the need to cut the workforce was Vodafone – there are a thousand redundant people – but the truth is that with the fierce competition of the Italian market, all operators (except for Iliad) have thought or they’re thinking about giving the workforce a snip. The unions speak of more than 20,000 people at risk, but these are estimates to be taken with a grain of salt. The number could fluctuate up or down depending on how the game goes on Tim who alone has more than 40,000 employees, yet the problems of the sector are atavistic and well known.
Percentages and statistics from the latest report from the Mediobanca research office speak for themselves: between 2010 and 2021, the turnover of the telecommunications sector decreased by 14 billion euros. On average a loss of about 4% per year with the mobile network (minus 5%) in greater difficulty. Just to give some specifics, according to AgCom, SMS receipts decreased by 2 billion and “voice” receipts by 5.6 in landline and 6.3 in mobile. Reasons? Different. But the main one remains the excess of competition. In Italy too many operators wage war on the market and this has led to a much more marked reduction in tariffs than in the rest of Europe: between 2017 and 2021 there was a 20% reduction against the EU average which is below 5%.
The world comparison
No wonder therefore if a comparison between the aggregate accounts of the main Italian operators and those of the world‘s big names shows that the profitability of the former is decidedly lower. And even less surprising is the fact that this gap widened dramatically in the four-year period 2017-2021. The Italian market, due to a drop in turnover and a rise in costs, went from an Ebit margin (profitability of sales) of 13.5% in 2017 to 3.3% in 2021. A merciless comparison with 15.9% of the big world players which was 14.2% in 2017.
The problem is that telecommunications is a sector that relies on investment. They are needed to implement 5G on a large scale, they are necessary to increase the diffusion of fiber and to seize all the growth opportunities that come from new technologies (cloud, artificial intelligence and Ict services) and from industrial diversification (offer of new services ranging from digital payments to cybersecurity). It is clear that if your margins decrease and in any case are lower than the competition, the gap with the competition itself is destined to increase.
The table wanted by the government
If this is the picture, it is clear that solutions are needed. The government is well aware of this, so much so that it has organized several meetings to solicit requests from operators and other companies in the sector and to implement a package of measures. There has been talk of the VAT intervention, the continuation of the use of voucher to promote the development of demand and modification of electromagnetic pollution limits.
But the impression is that everything is at a standstill waiting for Tim to resolve the match and Tim on the net. From a certain point of view it is understandable. The infrastructure is central and the players in the field – from Cdp to funds (Kkr and Macqauarie) and companies such as Open Fiber – they are the main drivers of telecommunications from both an industrial and financial point of view. On the other hand, we should enter into the order of ideas that we are talking about a sector that seems to have run out of time before a chain distorting effect is triggered.