The latest update on Italy’s telecommunications market contains new subscriber data which show how the country’s mobile, fixed-line telephony and broadband internet markets developed in the first six months of 2009. One of the most notable developments in the mobile market has been the contraction in the number of mobile subscribers, particularly in the second quarter of 2009. The latest figures show that Italy’s mobile customer base contracted by 2.2% in H109, following falls of 0.4% in Q109 and 1.8% in Q2. By the end of June, Italy’s mobile customer base was down 1.8% year-on-year (y-o-y), and penetration had fallen to 139.4% from its peak of 142.7% in December 2008.

Italy’s shrinking mobile customer base stems from the ongoing deduction of inactive prepaid users by mobile market leaders Telecom Italia and Vodafone Italy. The deduction of inactive prepaid customers reflects the saturated nature of the market and the need for these operators to improve their subscriber mixes by moving prepaid users to post paid contracts. The discounting strategies of Telecom Italia and Vodafone are expected to result in negative growth in 2009; by the end of the year, we predict that penetration will have fallen back below 137%. In the event that Italy’s two smaller mobile operators, WIND and 3 Italia, join their larger rivals in discounting inactive customers, a much steeper drop in subscriber numbers could be seen.

Meanwhile, the first six months of 2009 saw extremely weak growth for Italy’s broadband sector. In H109, the total number of Italian broadband connections grew by 3.2% to reach 11.775mn; the number of connections grew by just 1% in the first quarter of the year, the growth rate rising to 2.1% in Q209. The report believes that the economic slowdown is partly to blame for the weak broadband growth. However, we also attribute the performance of the market to the slow speed at which broadband network infrastructures are being extended to smaller towns and rural parts of the country. We have reduced our full-year growth expectations for the sector, and now envisage a 7% expansion for the year; by the end of 2009, we predict that Italy’s broadband penetration rate will have reached 20.8%, up from 19.5% at the end of 2008. In the longer term, however, we predict that 2010 and 2011 will see stronger growth rates for the sector. The network sharing agreement signed in August between broadband operator Fastweb and alternative operator WIND is exemplary of the sort of developments which the report believes will result in stronger broadband growth in the latter years of our forecast. Among other things, the agreement between Fastweb and WIND concerns investments in fibre-optic infrastructure.

An improved country risk rating is behind Italy’s greatly improved position in this quarter’s set of Business Environment Rankings for Western Europe. The higher country risk score reflects our slightly more upbeat view of the way Italy’s economy will develop in 2009. We also predict that economic growth will return to positive territory in 2010 with a 0.2% real expansion.