If you go to San Siro, in the last 5-6 months, whereas before you had difficulty browsing, sending WhatsApp, doing Instagram live, for 4-5 months everything works, nobody noticed.
At the Olimpico no, though.
No. At the Olimpico no, because in view of the Olympic Games we covered San Siro with something called a 5G bubble. To simplify the concept, we greatly improved the quality of browsing. Eh, nobody wrote us a thank-you email, though.
I didn't know that. [laughter]
But that's the point, you didn't know and you take it for granted that the phone is there and always works. So, I said let's start putting a pop-up where the fans, especially at the beginning of other teams' matches when they go to San Siro, we tell them look, the quality has improved because we did this thing.
Tomorrow I could also charge you half a euro to use connectivity in that specific case, it wouldn't change your life. Excuse me, how much do you pay for coffee when you go to the stadium? You who go to the Olimpico, you pay three times as much outside. This gives you an idea of the concept that customers have been accustomed to having quality always and anyway. If you go to England or Belgium, it's not like that.
So, look at how our company is made. Pietro, today we have Pietro Labriola, whom we already had some time ago, we also had fun doing some calculations on Telecom's valuation and we got there. Congratulations. You said what then your predictions on valuation were right, and I had set it up and missed it.
Guido, it was the first video with our first video, first video, and so we return to Pietro. But I wanted to say, look at how our company is made, right? Eh, I refer to Cora Will. On one hand we have Pietro today and we will talk about many things, a small premise on the operation that Poste did on Telecom. Remember that Poste launched a partially cash offer and then a OPS, that is a public exchange offer on Telecom Italia. I was saying, look at how our company is made, because on one hand me and Raffaele in Black Box said, well yes, a system operation like this was needed. After all, all telecommunications, almost all European ones, have the state inside. We were the only ones who didn't have the state inside, and you can see Telecom has gone in the last 15 years without the state inside. On the other hand, our cousin Riccardo out on Actually is more, let's say, new generation etc. etc. said 'But no, it's not possible, we're back to Liri etc. etc.' This is a great pride for us because it means a plurality of views and therefore, in my opinion, communication today, media today must offer different angles and then everyone must form their own idea. Eh, we with Pietro will talk about AI and telecommunications, but above all we will talk about the whole fiber part, because Pietro came out with, can I say a pamphlet?
Yes. Eh, you like it as a pamphlet on fiber that Raffaele practically studied to perfection.
You too, I hope. [laughter]
I mean, it's natural. Um, before getting there and before starting to talk, I care a lot about how it works, what will be the correlation between AI and the Telecom Sector, because again everything revolves around Telecom and telecommunications.
A word on Poste. You are the target company, so you can say little. I give only my very modest opinion from a perspective of ideas that, in my opinion, for the challenge we will have in the coming years, having a giant like Poste inside Telecom Italia's capital and now, I mean, even as the largest shareholder or even as the sole shareholder, we'll see how the public exchange offer goes. For me it's a great advantage. I also say, and here you can neither confirm nor deny this, but I also say that telecommunications have always had this big problem of investments that mean that cash generation is always a bit limited, that is, from EBITDA, which is the operating margin of telecommunications, to conversion into free cash flow, there is always some problem because telecommunications always have to invest and therefore have a cash generation that is always a bit poorer compared to EBITDA. In my opinion, with the merger we could have a company, since Poste instead has a free cash flow, that is a return and therefore a more important cash generation compared to EBITDA, we could truly have a company that is complete because it has the branches, which are those of Poste physical, has a very important cash flow conversion, and above all it is finally relevant. This is my opinion. Raffaele said they sank the Britannia and...
And I yes, in fact the first question I want to ask Pietro. We finally sank the Britannia, where we explain what the Britannia is.
Britannia, that ship on which they made this agreement, were pro-Draghi and all the American investment banks in which they decided the sale of all Italian assets that were sold for 27,000 billion, that is 13 billion euros. It's clear, it was 1992, Italy was burdened by debt, we came from the devaluation of the lira, in short it was a particular period, but there was this fire sale, let's say, of state assets and probably the emblem of this fire sale was precisely Telecom that ended up in the hands of Colaninno and then passed to other Italian entrepreneurs who filled it with debt to buy it. And then this debt clearly weighed on Telecom for years and years and years and therefore blocked, in short, like throwing the baby out with the bathwater, that is, it was a bad operation, right? And now we have probably sunk that ship and it is returning to the state.
So, I'll try to answer both. What Guido said is correct. Clearly we are under an Opas and therefore in my role as CEO, being the target company, I have to wait for the evolution, the analyses, and then the board first and then the market will express an opinion on the operation.
But there are some aspects that are important and the point that has been one of the things I have repeated most frequently in the previous 4 years when the shareholder base was varied and a bit more belligerent. My hope was always dialogue among all shareholders in the interest of the company, and also the fact that having Poste in the shareholder base is certainly an advantage. So this is the first point. Coming to what you were saying, as we go forward not only in Italy but around Europe, because outside Europe the context is different, we are beginning to understand even better the role of infrastructure. The telecommunications infrastructure is a private asset or is it the accelerator of GDP, that is, of a country's growth? If until some time ago it was in relative terms, it allowed communication, certainly communication has an impact on GDP. Today you are connected to the cloud, to security, for everything you are connected to the world through telecommunications networks. Well, let's go to a concrete example, the design of someone, giant European operators. So, tomorrow morning let's create an operator that is France, Spain, Germany, Portugal, and you choose someone else. Clearly Italy. Listed on the stock exchange, like all companies in the world, at some point there is a cash problem, you have to cut investments. And the main project is to build a fiber network. This operator based in Brussels decides the return on investment is greater in Germany and France, so I build the fiber network in Germany and France and not in Italy. Is it a problem of the listed company or would our country risk falling behind? I couldn't give that company any chance. You know, if I look at the numbers today of our country, as I also reported in the pamphlet, in Italy you spend €1400 to cover the fiber team. In France 400.
In France 400. Then here you earn...
So why...
Well, maybe we'll get there later.
In Italy you earn, if you're lucky, 20-25 and in France 35. In your opinion, this wonderful international operator puts money in Italy? No. So let's be careful, maybe in the future we will have pan-European operators for services, but the infrastructures will have to continue to be within individual countries. It's hard to imagine a different scenario.
Pietro, but can we make a comparison with railways? I mean, we are often looking at this book by Carlotta Perez that talks about all the technological revolutions that have occurred in the past, right? For example, that of railways is exactly what you say, that is, at a certain point, after many investments, productivity exploded because I'm talking about America managed to connect a huge country and therefore productivity increased thanks to connection.
But that of telecommunications is a paradox because look at Rome, you go around Rome there is overtourism. Sure, all hotels raise prices, right? and they keep cashing in. My overtourism is the growth of data volume. Everyone uses it and my prices remain, they go down. That, I was shocked by what is written in the book where you say that the revenues of all content providers increased by 130% while those of telecommunications by 6%, actually with zero inflation. I want to explain this. The real asymmetries of telecommunications for 25 years now is that the entire internet revolution, the streaming revolution, content, and now AI, is based on a Titan that carries the world on its shoulders, which is telecommunications, because telecommunications have to give you perfect services at prices, and this is crazy. So try to understand, you who are listening, the investment dynamics that derive from this if this system ends. This Titan carries the world on its shoulders at fixed prices and must always give you a perfect service. So Capex, when I said Capex, investments, investments, investments.
All hotels raise prices, right? and they keep cashing in.
They remain, they go down.
That, I was shocked by what is written in the book...
Can I give an example, even though I'm an Inter fan for Inter and Milan fans. If you go to San Siro, in the last 5-6 months, whereas before you had difficulty browsing, sending WhatsApp, doing Instagram live, for 4-5 months everything works, nobody noticed.
At the Olimpico no, though.
No. At the Olimpico no, because in view of the Olympic Games we covered San Siro with something called a 5G bubble. To simplify the concept, we greatly improved the quality of browsing. Eh, nobody wrote us a thank-you email, though.
But that's the point, you didn't know and you take it for granted that the phone is there and always works. So, I said let's start putting a pop-up where the fans, especially at the beginning of other teams' matches when they go to San Siro, we tell them look, the quality has improved because we did this thing.
Tomorrow I could also charge you half a euro to use connectivity in that specific case. It wouldn't change your life. Yes.
But also discussing with my people they say nobody will accept, and my counter-provocation is, excuse me, how much do you pay when you go to the stadium? You who go to the Olimpico, how much do you pay for coffee? You pay three times as much outside.
Eh, sure.
And the porchetta sandwich you pay three times as much outside. And you have to tell me why if I guarantee you that service with much better quality in a context that is overcrowded, overtourism. This gives you an idea of the concept that customers have been accustomed to having quality always and anyway. If you go to England or Belgium, it's not like that.
No, no, in fact it's as if, excuse me on London, I add on London, if many are listening, they are kids who are at university and everything, in London there are areas where the cell phone doesn't work at all, it's very difficult. In London, I tell you, we will get to do what you say. There will be, unfortunately or fortunately, two pricing because if you want to have priority over others you will pay more for it.
As normal everywhere. It's as if, let's say, the antitrust in its ideas of competitiveness had worked, that is, worked, overworked only in the telecom sector, because it seems to me the only sector for...
So, to be fair, first of all there is Agicom, which would be those who regulate the telecommunications sector, who have to respond to European regulations, European guidelines, so it is from Europe first of all that indications must be given. At the same time, there are also national rules that are not necessarily aligned with European ones. The example I always give, we are in 2026, we have AI, if you want I'll let you hear how the AI answers on the phone, and I have the obligation until 2029 to answer with a human operator 24 hours a day. Why? A rule. And until 4-5 years ago, I had a rule that I had to keep a paper copy of the contract in stores. And my question is: 'Show me the paper copy of the Netflix contract? Because I do.'
Yes, because excuse me Raff, then I want to let you talk about the book because, but I want to play the conspiracy theorist that it's not true. I'm a bit of a conspiracy theorist, it can be conspiracy theorist.
Yes, [laughter] but if I were a real conspiracy theorist I would say 'Gentlemen, we had an obligation from the antitrust to lower all telecommunications tariffs in recent years to promote competition. So explain a bit how it works, that is, these poor telecommunications competed among themselves, had to keep prices low to help all the platform companies, that is, the platforms that are on the network to make profit margins. So, either of the two, we were all crazy because we had and we have to tell Riccardo out of Acccioli who is in favor of competition. I always try to explain to him, but then competition must be everywhere, otherwise, I mean, I have to be a conspiracy theorist, that is, I have to deduce that all the lobbyists in Brussels said: 'My dear, we need Telecom in the last 20 years, you know what's new? We need them like bread, you have to keep tariffs low, go ahead with competition.' Long live Riccardo, the paradox, you know what the paradox is? The paradox, in my opinion, is that the functioning of large technological platforms very often works with advertising, right?
It's not only that, sorry,
No, but no, I say they make a lot of money, clearly, with advertising.
Let me do it, let me do it.
Exactly. And you? That is, and while...
Let me do it, but because I, you see, there's a film on Netflix, The Social Dilemma. And sure, we remember one of the executives,
Yes. It says essentially that the main competitor of these OTT subjects, you know who they are? The telecommunications operators, because they have a quantity of information that they could monetize that they don't monetize.
Why don't we monetize them? Will someone accuse us of lack of innovation? No. Have you ever tried to work on profiling, being a national operator in Italy with European privacy regulations and GDPR? I don't know if you've read all the lawsuits and discussions that have taken place between OTTs and Europe on the topic of profiling, and here a context opens up in which all this digital world does not necessarily respond to the regulations of the subject using the service, often they respond to the regulations of the country from which they provide the service. And so there is this situation. Here,
Translation, what Pietro is saying is that I have all the data, but I can't use it.
The others instead have the data and sell it, and it's their main business. This is always...
Exactly. Pietro, but don't you think a sort of Pandora's box has been opened now? In the sense that all these contradictions have been simmering for years, right? But now don't you think we've opened this box?
Certainly, because the various telecommunications operators have progressively reached a situation where their financial situation, let's say, is not idyllic.
Then to return to what Guido says, if 30 years ago it was decided to redistribute value that was in the hands of a public monopoly concessionaire to various operators, in itself it was not wrong. The problem is going from one excess to another. At a certain point, when we began to understand that we had redistributed adequately, it was necessary to return to a context in which the model allowed a return on capital to accelerate investments. We were slow to recognize this because now we have created a superstructure of rules and regulations that take a lot of time to modify. That is, we are absurd that if you want to go from one operator to another, you want to go from TIM to Iliad, so everyone is happy, ok?
From TIM to Iliad, I, you cannot...
Let's greet the friends from Iliad who are waiting here, eh.
Hello Benedetto.
So what happens? I, TIM, to keep the customer, I cannot do retention, it's forbidden. Portability happens within a few hours. Now those from electricity are entering and telecommunications have entered. But if you switch from one energy operator to another, TIM, the energy operator has the right to do retention. But explain to me how these rules work? It's what Guido was saying. By now we have a situation where the problem is not the rules. We towards OTTs, we towards OTTs, we towards energy, because we have become a pervasive sector on everything.
But keep saying, if we don't earn, all these subjects that revolve around us...
Because none of them bought the frequencies, none of them pay the tower companies, because let's be clear, the only ones putting money are us. The tower companies today don't build an antenna if I don't guarantee that I'll pay them for 10 or 20 years. Everyone enters. Energy, OTT, soon also the Hyperscalers. Who has to pay for the infrastructure? Us.
So there's the Wild West on one side and something hyper-regulated on the other. Wild West and social networks, e-commerce.
Cap tut? In the past these sectors were separate, each had its own sector. Technological evolution made these dividers disappear, and everyone, but the beautiful thing is that everyone enters my space with their own rules. Thanks.
I, but indeed, if I can be even more conspiracy theorist in all the M&A, that is, mergers and acquisitions of the last 20 years, all these platforms have been careful not to acquire a telecom operator because they said, my dear, the telecom operator, sorry, which would be fundamental for them because their real risk is if a Telecom can no longer give them service, right? So vertical integration, I buy the telecom too, they were careful because they are really...
Because there is the famous law of the Midas touch in reverse. I can't say Midas. Touch, touch me. Pietro, but how does it work in Brazil? Example, to talk, let's go out, there are three operators in Europe. When I arrived in Brazil, there were five operators, two or three were so-so, we were also doing very badly, we went from 5 to 3. Then, when there was the 5G tender, what was done, I was the president of the telecommunications operators in Brazil at that time, I convinced the Brazilian government, instead of 'the egg today, the chicken tomorrow', that is, I pay you very little for the frequencies, but I take the commitment to build a 5G network within 5 years, and today Brazil is one of the countries with the 5G network standing, the one needed for the cloud,
Improves the world. There's a bit, and instead the last one, how does it work in America? That is, your American peers...
They don't have problems because since there are three on a population of 400 million, and they have a mobile phone package that costs around $40-50, excuse me, so let's make the numbers clear. If I had an ARPU of $40-50, ARPU is the average revenue per user, that is, how much a customer yields you, right? Every extra euro I earn, I make 160 million in equity free cash flow. So if I had the ARPU, the average revenue per American customer, that's 6 billion more in equity free cash flow per year. Guido could tell you that at this point the valuation of TIM's stock would be €3-€4. This also explains why 20-25 years ago Telecom's stock had a valuation of that type.
Eh, sure, it's true, really. Sure.
So it's trivial when you have 6 billion more than me in equity flow, I'll do all the investments you want,
