Pietro Labriola Amministratore delegato TIM - Innovation - CEOforLIFE Awards - 24 ottobre 2024

So, we probably need to reconsider a bit what we think about the telecommunications sector. Our company, like the other so-called ex-incumbents, the former public concessionaires, 30 years ago were the engine of innovation, they were de facto monopolies with high margins, lots of profits, and they invested in research and development. Over time, the market liberalization process has certainly brought, to the benefit of customers, a strong reduction in the costs of telecommunications services, but at the same time, alas, it has impoverished the balance sheets of these companies, which normally start cutting from what? From research and development. So the innovation process that was once inside the telcos—remember that Telecom Italia invented MP3s, perhaps young people don't know, but MP3s were invented by that obsolete company that I manage today. Today we do not have the capacity, as an industry, it's not a problem of TIM Telecom Italia, it's not a problem of Italy, it's a problem of Europe, the capacity to invest, because internally, when I discuss, I always try to give extreme examples that make the evidence clearer. Our sector is not particularly different from the gas or energy sector. But we are like two identical twins, I say identical so there's no doubt, they are the same, who were separated in childhood, placed in two different families, then one went to Harvard and the other became a butcher in Altamura. Telecommunications is the butcher of Altamura, my hometown, so no one gets offended. I say the butcher because in front of my mother's house there is a butcher shop and my mother always says, 'I shouldn't have made you study, because then you would have been at home near me in the butcher shop.' Jokes aside, what happened back in 1990? And this shows that I am getting old. When I was still studying, Europe decided that the telecommunications sector needed to be liberalized. It decided to apply logics of subdivision and definition of cost-oriented pricing rules that 34 years later have the current result. TIM, not Italy, in Europe telecommunications operators do not make money. For electricity and gas, the choice was different. In what sense was it different? The market was not liberalized. When Terna has to invest 1 billion to build the distribution network, there are rules that say the final prices at which electricity will be sold must be such that on this billion you must recover at least 7%. Guaranteed, because if you don't recover 7%, no one will lend you money to invest and the system remains without infrastructure. In the case of telecommunications, I had to put in 1 billion, actually when I also owned the network I put in 3 billion a year, certainty of return on investment zero. And who invested? Only me. Fastweb, Vodafone, they don't use a network they built themselves, they use my network, my former network. So today we are faced with the fact that an industrial policy, that of infrastructure, energy, gas, is still a segment where there are profits to invest and probably also profits to invest in innovation. Telecommunications in Europe are no longer in these conditions. So says Pietro Labriola, the butcher of Altamura.

The report signed by Draghi less than three months ago diagnoses the problem. After the anamnesis, there is no money to invest, the result is that the rules must be changed. Now, is this the complaint of someone who wants their company to have better results? My life doesn't change. In two years my term expires, I'll go work for another company, so nothing will change. But since we are talking about digitalization, digitalization without telecommunications infrastructure, you can dream of it. Now there are colleagues at INWIT, meaning if I can't collect, I don't pay him for the antennas. It's a very simple equation. So much so that in an article I'm preparing, I say: either you allow us, with the rules, to have adequate remuneration of invested capital—today the remuneration of capital of telecommunications companies is lower than the cost of money.

That's why Draghi also invited and gave as a priority for Europe, for the European relaunch, the redefinition of rules in the telecommunications sector. Then these are, that is, a race to the bottom, no, what Draghi says is: in the United States, as we have also been saying for some time, since I returned to Italy, I reiterate it repeatedly. Today in the United States, how many operators are there? Have you ever asked yourselves? Three. How many inhabitants do the United States have? 400 million. How many operators does Brazil have? Three. Inhabitants? 210. How many operators does China have? Three. Inhabitants? You do the math. 1.4 billion, 1.6 billion. In the range, we never know. India the same. Europe 120, Italy 5. Ask yourselves a question and give yourselves an answer. That is, if revenues are what they are, if revenue per customer is, if costs, excuse me, are the same, because the cost of labor between Italy and the United States is not very different. The equipment I buy and Americans buy are the same suppliers: Nokia and Ericsson. The cost of production factors does not change. The top line, which is revenues, is lower here, you have less income. Remember that earlier I joked, those of you with ILT probably spend €6-7, those of you with us spend €8-9. Do you know how much a mobile phone subscription costs in Germany? €30. How much in the United States? $100. How much in Spain? €15. If I try to increase the price by €1 for each of you, I'll have a strike outside my office. Then, if the networks don't work, there's a problem, digitalization doesn't exist.

So, I'm sorry in an event like this where everyone has talked about innovation, good news, I wouldn't want to be Totò, you know? who arrives with the black glasses. No, jokes aside, but you have brought to attention an urgent problem to understand what possible scenarios might be to improve a situation that I understand is quite serious, absolutely yes. But earlier I heard the colleague talking about metering, metering, sorry, and he was talking about it in the context, I arrived late, but for example the metering activity done also through IoT, the Internet of Things. The Internet of Things means multiplying by 200, 300, 400 times the number of connections to the network. To increase the number of network connections by 200-300 times, I have to build a 5G network. To build a 5G network I need capex. In Europe there is no country that has the so-called Standalone 5G network, Release 16, which allows connecting hundreds of thousands of devices simultaneously. In Brazil, where 5G was awarded in 2021, all Brazilian state capitals are covered by standalone 5G. So if someone wants to experiment with self-driving cars connected to a 5G network, in Brazil you can, in Italy forget it. So my is a call to action to say: I have to do my part, I have to work, I have to improve profitability, I have to improve the level of services, but the problem is a problem of rules. Rules that were given more than 30 years ago and that now the European Community is realizing must be changed in some way. If we don't change them, there is also another problem that needs to be addressed. Innovation is a beautiful thing, and today more than in the past, I tell the kids, go watch a video on YouTube by You. It's a video that shows you how long it took to reach a number of customers. Radio took decades to reach 100 million customers, television decades. In recent times, innovation is so strong that TikTok reached a billion users in less than 3 years. WhatsApp took six. So evolution is changing. We don't realize it because we are like those on a train, the passengers of a train. We look outside and it seems like everything is going slowly. It's like when you fly and see another plane traveling parallel. You say, strange that we don't crash, we're going so slow. You abstract, look outside and see a completely different speed. The same thing is happening for innovation, and so until some time ago the use of the network was quite clear and defined for us. Today it becomes more complex.

We are subject to rules. If you have to make a call with us as TIM, I must have a contract with you under the Pisanu law, I must have personally verified your ID card that matches your face so that you can make phone calls. Then I have another obligation. If you have a problem and want to call a call center, I have to guarantee a call center 24/7 with a human operator. Beautiful AI, I can't use it. Do you know how much a human operator response costs me? €3. Remember that you give me €7-8 if I'm lucky, for the minutes that pass. Yes. So, but when you call with WhatsApp, did you sign a contract? I don't think so. Did they ask for an ID document? No. If it doesn't work, you probably get annoyed with me because you think it's my fault when maybe it's the operating system or the problem. Today, and it was in the newspapers in recent days, Netflix is raising prices again, but I haven't seen any of you tearing your hair out and coming to my office saying 'We love TIM, we love Labriola.' If I raise prices by €1, you come to my office and beat me up. But how does Netflix work? It works by using the data on our network, and every time it adds 4K movies, my network costs go up. If tomorrow morning all videos become 4K, I have to put a billion euros into my network, and will you give me that billion euros? No, because you come to strike outside my office for the euro. Who has to give it to me?