The Italian telecommunications environment is undergoing substantial change, influenced mainly by the impetus towards ultra-broadband connectivity, in primis, Fiber-to-the-Home (FTTH) technology. FTTH is made further appealing by the demand for ever faster data transfer, coupled with network reliability and advanced digital services. Italy is improving but still needs to push to realise FTTH coverage and penetration across the country, compared to other OECD and European countries. Open Fiber and FiberCop expansion are the lead players in the business scene, with government support to accelerate deployment, the ambition for one national network being just one among a host of target outcomes.
With the establishment of Open Fiber in 2015, the organisation sought to pave the way for competition in the fiber rollout, thus ensuring its leadership position in the FTTH customer market. Today, Open Fiber does what it does best-build an FTTH infrastructure for the whole of Italy within an investment exceeding €8 billion by the end of 2023. Open Fiber had more than 120,000 km of FTTH infrastructure deployed and had connected over 14.5 million homes, businesses, and public administration offices by then. Incidentally, on that day, about 60% of residential users surfing with an FTTH network in Italy do so on Open Fiber’s infrastructure (data as of 30 September).
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Focus on White Areas: Closing the Digital Divide
A significant part of Open Fiber’s mission focuses on the “White Areas”, which are defined as regions where private operators historically have not found it commercially viable to invest, resulting in a lack of broadband and ultra-broadband infrastructure. These areas are considered the “real challenge” due to their complex morphology and dispersed property units compared to large cities. Open Fiber is carrying out a major infrastructure build in these areas, aiming to bring ultra-fast connectivity to over 6 million property units. By the end of 2023, Open Fiber had built 74,600 km of infrastructure in White Areas, reaching 83% of its coverage plan for these regions.
This resulted in the advent of 720 additional municipalities, as well as those within 676,000 property units in 2023 alone. Open Fiber has reached work in a total of 4,774 municipalities out of 6,232, i.e., 77% of the whole world, within the Infratel concession site, which comprises most of the White Areas. Works on these less-served areas by Open Fiber have been termed critical, and it seems to contribute a lot to reducing the digital divide in Italy significantly, thereby pushing the country closer to the EU average regarding housing units covered with FTTH.
It implements cutting-edge technologies like XGS-PON, which allows for 10 Gbps symmetrical speeds and greater energy efficiency compared to GPON. Besides various other works such as opening connected schools, digital construction sites using IoT and BIM technologies, and the transformation of film distribution through the use of fiber optics into theatres, Open Fiber does projects. It reflects innovation since one of the initiatives is the Open Factory, a research center focusing on the future of fiber optic technology.
A New Standalone Infrastructure Giant
Alongside Open Fiber, FiberCop emerges as another major force in the Italian fiber landscape. FiberCop is described as the leading Italian digital infrastructure operator. It was established as a fully independent spin-off of TIM’s entire fixed-line network on July 1st, 2024. Operating as a main wholesale provider of fixed access in Italy, FiberCop manages a substantial customer base of 14.7 million active lines, primarily composed of high-performance FTTC and FTTH connections, but also including ADSL and Voice technologies.
FiberCop is actively pursuing its FTTH modernisation rollout plan, reporting coverage of 11.6 million Unità Immobiliari (UIs) by the end of September 2024, an increase of 1.4 million compared to December 2023. By the end of the full year 2024, this figure had risen to 12.2 million UIs passed, representing a gain of 2 million UIs in the year. This progress means FiberCop has reached around 60% of the total UIs it plans to cover in the next three years.
FiberCop expansion in FTTH rollout progress and targets
The company’s rollout proceeds in both autonomous areas (Black and Grey areas where FiberCop invests independently) and areas covered by the National Recovery and Resilience Plan (NRRP). By September 2024, FiberCop had reached 10.7 million UIs in autonomous areas, nearing its 2024 full-year target. In NRRP Grey areas, the rollout saw significant acceleration, passing over 800,000 UIs by September 2024 and reaching over 600 thousand UIs about NRRP Lots by the end of 2024. FiberCop asserts it is fully on track with the NRRP FTTH coverage targets set by Infratel.
FiberCop’s strong market position is underscored by its share of new FTTH connections. According to AGCom data, FiberCop captured over 50% of net new FTTH lines activated in the market during Q2 2024 and increased this to 58% in Q3 2024. Its overall market share in existing FTTH active lines grew steadily to close to 40% by June 2024. The company operates on a co-investment model, allowing other operators to participate in deploying optical fiber in Italy within an infrastructure competition framework. This model has led to partnerships with operators like Netoip and TLC Telecomunicazioni to accelerate fiber rollout in various municipalities.
Financial Performance and Strategic Investments
FiberCop’s financial results since becoming a stand-alone entity on July 1st, 2024, have been robust. For the first nine months of 2024 (pro forma), revenues reached €2.9 billion, with full-year 2024 revenues hitting €3.9 billion. Normalised EBITDA stood at €1.6 billion for the first nine months, and full-year organic EBITDAaL reached €1.9 billion. The company has significantly increased its network investment, with total Capex for FY 2024 accelerating to €2.4 billion, of which €1.4 billion was invested in the second half of the year following the carve-out from TIM.
FiberCop’s financial position is described as solid, with a net debt of €9.2 billion at the end of 2024 and a strong liquidity margin of €3 billion, covering debt maturities beyond 2028. FiberCop is backed by a consortium of long-term investors including KKR (37.8%), CPP (17.5%), ADIA (17.5%), the Italian Ministry for the Economy and Finance (MEF) (16%), and the Italian infrastructure fund F2i (11.2%).
At an earlier stage, FiberCop was controlled by TIM (58%) along with KKR Infrastructure (37.5%) and Fastweb (4.5%). The company is committed to delivering FTTH to 100% of its targeted UIs in three years and meeting NRRP objectives by June 2026. FiberCop is also focusing on a new energy strategy, establishing EnerCop for renewable energy self-production.
Growth Prospects for Italy’s Fiber Market
Growth is anticipated for the wider Italian optic fibre market, which will finally add more than USD 900 million from the year 2023 to the year 2028. Advertised governmental incentives, including the National Ultra-Broadband Plan, are fostering the deployment of high-speed networks across the country. Legislation like the Regulation regarding Passive Access Network Infrastructure (PNRI) by AGCOM is to guarantee fair access and competition. The government has also encouraged the separation of wholesale infrastructure from retail services, a process involving Open Fiber and TIM (FiberCop).
A Broadband Development Fund exists to support deployment in underserved areas. Italy adheres to the European Electronic Communications Code (EECC), which sets rules for high-speed network deployment. Technologies like DWDM are adopted to increase data transmission capacity. Optical fiber is also foundational for smart city initiatives and integrating with 5G networks. Despite progress, the overall FTTH take-up rate in Italy (around 22% in September 2022) lags significantly behind the European average (52%).
The project to create a single national ultra-broadband network is a complex and long-standing issue in the Italian telecommunications sector. This would aim to consolidate the Italian telecommunication infrastructure, encompassing both copper and fiber networks within a single operator. Nearly 20 years of discussions have taken place regarding the idea, and attempts in the past have failed for various reasons.
The present proposal sees the fixed-line assets of the former monopoly TIM (its Netco entity, which includes the national copper network, FiberCo, and international network Sparkle) amalgamated with the activities of the state-supported operator, Open Fiber. The remainder of the business of TIM would be housed in another company, ServCo, that would carry out the operations in the end-customer sphere.
Valuation Challenges and Stakeholder Dynamics
One major obstacle is the valuation of TIM’s network assets. While analysts’ estimates vary widely (between €18bn and €31bn), TIM’s largest shareholder, the French company Vivendi (holding a 23.7% stake), expects a valuation well above €30bn. KKR, a key potential buyer, has made an offer valuing the infrastructure at €21bn, potentially rising to €23bn under certain conditions, which is significantly below Vivendi’s expectation. As TIM’s relative majority shareholder, Vivendi’s stance represents a considerable challenge, requiring diplomatic discussions.
However, the revealed involvement of the Italian Ministry of Economy and Finance (MEF) in potentially joining a consortium with KKR to acquire Netco is seen by some, including sources close to Vivendi, as a positive development, potentially opening the door for serious dialogue. The MEF intends to participate with up to a 20% ownership share, aiming for a pivotal role in NetCo’s future strategic decisions.
From a European legal perspective, the proposed Netco Project, especially its declared goal of merging with Open Fiber, would need to be notified to the European Commission under merger control rules. The concentrated nature of the wholesale broadband market in Italy raises competition concerns, which may require the parties to provide remedies to achieve clearance for this transaction.
In addition, the fact that the MEF is using public funds requires assessment under the European state aid legislation to ascertain that investments are made under market conditions and do not constitute unlawful state aid. The complexity and time-consuming nature of the project are also a risk for the timely implementation of the projects under the Italian Recovery and Resilience Plan (PNRR Plan) assigned to TIM and Open Fiber, potentially affecting funding.
Conclusion
All in all, in Italy, the fiber market is very vibrant, as it is driven by major investments from leading companies such as Open Fiber and FiberCop, alongside government efforts towards expansion of coverage and bridging the digital divide. The two companies are making great strides in deploying FTTH infrastructure in very challenging places and in meeting national targets. Its strong financial and share gains, highlighting its momentum since becoming a standalone, became apparent in FTTH net additions.
There remains a considerable challenge in the single national network ambition highlighted by the Netco Project, and it has several other dimensions, including major valuation disagreements and an array of regulatory hurdles at both national and European levels. However, as great complexities abound, such as these, direct government involvement and the ostensible openness to dialogue of major shareholders lend credence to the idea that everything is still in progress, yet on a long and difficult road toward reshaping Italy’s digital infrastructure.
