Telecom Italia is how other telcos fear they may one day look

Sometime between the third and fourth centuries, the Roman Empire spun off its eastern half and then spent the next few hundred years being ravaged by marauding Visigoths and fanatical Turks as both parts crumbled. A similar story is playing out more quickly at Telecom Italia, an ancient institution that sells telecom services to modern-day Romans and their neighbors.

Much like Rome in the fourth century, Telecom Italia is now in an advanced state of decay, as the latest numbers show. Sales continue to fall in Italy, down 5.3% for the third quarter on a like-for-like basis, to about €2.9 billion (US$2.9 billion), compared with the same period of 2021. Go back five years and Telecom Italia made about €3.8 billion ($3.8 billion) over this part of the year.

Another 30,000 mobile customers in Italy decamped in the quarter. Nearly 600,000 have gone in the last year. The steady erosion of the domestic empire means Telecom Italia relies on Brazil as a crutch. With revenues there rising nearly a quarter, to about €1.1 billion ($1.1 billion), group sales inched up 1.1%, to nearly €4 billion ($4 billion).

The real calamity was what happened much further down the profit-and-loss statement. A tax bill of €2 billion ($2 billion) left Telecom Italia reporting a €2.2 billion ($2.2 billion) net loss, compared with a €222 million ($221 million) profit last year. Even disregarding this, its operating profit almost vanished, falling 91%, to €41 million ($41 million). Amid rampant inflation, costs were up sharply. And despite all efforts to whittle it down, Telecom Italia’s net debt has grown by €2.5 billion ($2.5 billion) since the end of last year. At €20.5 billion ($20.4 billion), it is more than four times the company’s stock-market value.

The great carve-up

For years, Telecom Italia’s response to this decline has been to carve off and try selling bits of its telecom empire to the private-equity barbarians at the gate. It has already ceded control of Inwit, the towers it needs for its mobile network, and holds endless talks with government officials and other parties about merging its fixed-line network with Open Fiber, a state-backed wholesale operator.

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