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March 28, 1996

TELECOM ITALIA MOBILE PROSPERS AS MONOPOLY FADES

By CBR Staff Writer

Telecom Italia Mobile SpA announced net profit equivalent to $218m on turnover of $1,750m for its first (six-month-long) fiscal year as an independent company. At the same time, its controlling parent, Stet SpA said that the cellular operator’s pro forma revenues for the entire year were approximately $2,890m, up 44.8% over 1994’s pro forma $2,000m – operating a cellular monopoly in a country where organized crime finds mobile telephones very useful adjuncts indeed is a very cash-generative business. Based on the net income, Telecom Italia Mobile said it would recommend dividend payments of 10 and 11 lira on common and savings shares, respectively. Telecom Mobile also reported total investments of $435m to expand its TACS analogue and Groupe Speciale Mobile digital networks and further distance itself from its competition, latecomer – through no fault of its own – Omnitel Pronto Italia SpA. The dominant operator’s TACS and European digital networks cover 70% and 58% of Italian territory respectively.

Territorial coverage

Omnitel insists that it now has the minimum 40% territorial coverage required by its operator license and that it should hit coverage of 50% of the Italian population by the end of May. Not surprisingly, Telecom Italia Mobile has disputed the claim since Omnitel got the green light to begin full-blown marketing of its service only in mid-December. It even went so far as to hire eight technical university professors to prepare sworn affidavits in which they measure Omnitel’s network coverage. The professors calculated that Omnitel could have been expected to have – as of February 23 – coverage of only 34% to 35% of the territory of Italy, a conclusion that Telecom Italia Mobile then transmitted to Posts & Telecommunications minister Agostino Gambino. Without 40% coverage, Telecom Italia Mobile said, Omnitel has no business even posing as a network operator, much less demanding that its users be hosted on Telecom Italia Mobile’s digital network in the unique, government-brokered national roaming arrangement. The government chose to push ahead with the agreement, which took effect last week and is good for a maximum of two years, as part of Omnitel’s compensation for having to pay a franchise fee of $470m where its rival paid zilch.

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