Company Trend Analysis - TIM Learning From French Experience - JUNE 2017

BMI View: While we still do not think Iliad will be able to replicate its French success in Italy, TIM is rightly wary of the entry of a new disruptive actor. The incumbent is learning from the experience of the French operators, which had failed with their convergence offers, by launching a new no-frills sub-brand targeting one of Iliad's expected strategies.

TIM has launched Kena Mobile, its no-frills sub-brand. The company will offer a plan as cheap as EUR3.99 a month, offering either 1,000 minutes or 4GB of 3G data, with a plan costing EUR9.99 a month offering 600 minutes, 6GB of data and 100 SMS. With the move, TIM is looking to counter Iliad's future launch in the Italian market, expected at the end of 2017, and has learnt from the experience of French operators, which had focused on convergence and not cheaper prices before 2012.

We have previously written that Iliad would not be able to fully replicate its French strategy in Italy, because of the widely differing market structures, and its lack of brand recognition in the country (see ' Iliad: Opportunities In Italy, But Not The French Way ' , July 6 2016). This does not mean that it will not act as a disruptor in the market, which remains under-developed in terms of penetration of advanced services (postpaid, LTE, fibre, convergence) compared to its peers. With the launch of the sub-brand, TIM has learnt from the experience of French operators, by offering a plan with a low fee, a mainstay of Iliad's strategy. The French operators had first focused on convergence prior to Iliad's entry in the mobile market in 2012, as a way to lock in consumers, but this was not successful, and they soon all launched sub-brands to try and stem customer losses. Iliad has managed to gain a 15% market share in under five years, and TIM is taking no chances, by pre-empting what it expects Iliad to do in Italy.

Wary Of Iliad's French Success
Free Mobile Market Share (%), 2012-2016
Source: Iliad, BMI

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