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Wednesday, July 26, 2006

Voda Italy v TIM (2Q 2006)

Telecom Italia (TI) released their 2Q results last night and I thought it would be interesting to compare the relative performance to Vodafone Italy. The comparison is quite difficult because TI yesterday released full half-year results, whereas Voda only released a set of KPI’s of dubious value. Vodafone’s half year is Mar-Sept wheras T.I’s is Jan-Jun. Note, I have grossed up the relevant Voda figures (traffic & customers) to take into account Verizon’s equity holding.

vod italy tim

The headline figure is that Vodafone has lost market share compared to Telecom Italia, probably this is why last week Vodafone went crying foul play to the Italian courts.

TI also revealed that its’ EBITDA margin has declined from 51.7% to 49.8% y-o-y (Q2 comparison) and the absolute EBIT has declined from €2,025m (1H’05) to €1,874m (1H’06) – hardly a great performance. We will have to wait to see Voda’s profitability performance, but I suspect that it also will show a decline after all, the EBITDA declined from 53.4% in fiscal year 2005 to 52% in fiscal year 2006 (to Mar)

Whilst the impact of termination cuts is apparent to all, I suspect the effect of H3G Italia will have had a bigger effect on the market dynamics. I also suspect that if a merger is manoeuvred between the third player, Wind, and H3G Italia that normal market dynamics and high profitability (relative to Scandinavian, UK & Dutch markets) should return for all.