Telecom Italia unfazed by Iliad's Italy venture

By Alberto Sisto

ROME (Reuters) - Telecom Italia is not worried about French telecom group Iliad's entry into the Italian market and plans counter measures to defend its position, the head of the firm said on Wednesday.

France's Iliad agreed to become Italy's fourth mobile operator to help smooth the way for CK Hutchison Holdings to merge its 3 Italia with Vimpelcom's Wind.

"Iliad's entry into Italy does not worry us. Italy is a very different market to France," Flavio Cattaneo said on the sidelines of an event in Rome.

Cattaneo's comments follow a source-based Bloomberg report which said Iliad planned to grab 10-15 percent of the Italian mobile phone market by using the same low-cost methods that helped it secure 17 percent of the French market in just four years.

"Iliad cannot take advantage of the surprise effect and from our side there will be counter measures that are adequate and coherent with our positioning in the market," Cattaneo said.

Iliad's main challenge will be to compete in a mature market such as Italy, where prices are already low, where the French operator lacks a distribution network and where its brand is not known, analysts have said.

Italy's anti-terrorism law also requires owners of a SIM card to be identified with an identity card, creating an additional hurdle to getting new customers.

"Iliad has certainly secured good network conditions (spectrum, sites and roaming) and has the know-how and expertise but we think that as a greenfield operation the commercial challenge will be significant," Kepler Cheuvreux analysts said in a note.

However, Iliad sees Italy's telecoms market, which is worth around 30 billion euros ($34 billion) in revenue, as attractive, with potential to compete on prices, the French company said in a presentation in August.

It plans to break even at the core earnings level with a market share of less than 10 percent.

Analysts also said the fact that a lion's share of Italy's mobile market is pre-paid will make it more difficult for existing operators to protect their customer base.

Shares in Telecom Italia, which have lost more than 30 percent this year, were flat at 0.758 euros at 0847 GMT.

Cattaneo, who became chief executive in April and has promised to step up cost cutting to boost profitability at the heavily indebted former state phone monopoly, said Telecom Italia's results for the third quarter were "very positive, both in terms of the EBITDA margin and for the top line".

($1 = 0.8913 euros)

(Additional reporting and writing by Agnieszka Flak; editing by Jason Neely)