Telecom Italia (TIM) has been through turbulent times in recent years but is putting considerable faith in telco cloud services to help it turn itself around. With its mobile business under increasing pressure, it is eyeing a break-up, with carve-outs of its tower operations (into a partnership with Vodafone) and of its cloud and data center business, via a strategic alliance with Google. It is also in talks with private equity firm KKR about potentially selling its fixed-line division and merging it with state-backed OpenFiber to form a single national FTTx infrastructure.
The divestment program, along with stringent cost-cutting including layoffs, has reduced TIM’s debt mountain from €23.3bn ($25.5bn) in 2018 to €21.7bn ($23.7bn) at the end of March 2020. After deals with Arcadian and KKR, the telco Italia estimates it will have net borrowings of €17.7bn ($19.4bn), freeing up funds for investment.
Courtesy of the Google venture, TIM is targeting €1 billion ($1.1 billion) in annual revenues by 2024 from cloud, and €400 million ($438 million) in earnings. It plans to launch a separate operating company to expand its public, private and hybrid cloud and edge computing services
TIM has also acquired Google’s Italian cloud partner Noovle, an IT consultancy and systems integrator. The telco said this purchase would enable it to “gather significant speed through the future creation of its own newco dedicated to cloud and edge computing services”.
Noovle provides services and projects to support virtual IT infrastructure, remote working and AI services and had over 100 certified professionals for Google Cloud applications.
“As the reference partner of Google Cloud in Italy, it will allow us to complete our expertise in this sector,” said Carlo D’Asaro Biondo, TIM’s recently appointed EVP of cloud projects. “With the synergies it will bring, we expect a significant acceleration on the supply front and strengthening of our position on the market.”
D’Asaro Biondo joined TIM this year following a decade at Google, most recently as head of partnerships and strategic relationships in the EMEA region.
TIM first tied up with Google last autumn and then announced it as a partner for the newco earlier this year, when Google announced its Mobile Edge Cloud platform, its most significant bid yet for a bigger share of the telco market (it has signed up AT&T, among others).
Some MNOs will build all their cloud infrastructure themselves, but it is an expensive and challenging task to optimize those platforms for highly demanding virtual network functions (VNFs) such as a vRAN, and to support a wide range of enterprise and consumer applications.
Some are considering the once-taboo idea that they might entrust key network functions to third party or public cloud providers, taking advantage of those companies’ huge scale and large base of cloud-oriented skills, and converting upfront capital investment to opex fees.
At the time, TIM said it expected 5G to be a major driver of growth in the cloud computing market in Italy, and for many opportunities to arise from the intersection of edge and 5G. CEO Luigi Gubitosi said in a statement: “In the next years, cloud and edge computing will represent two of the key markets that will mostly benefit of the new products and services enabled by 5G technology.”
TIM already has the largest market share in Italy for cloud services to enterprises, with over 20,000 business customers.
For operators which are assessing how far they want to move to the public cloud, a three-stage process is logical. Partnerships for enterprise cloud services are the no-brainer for most, working with the web giants rather than against them; moving internal and back office processes to be ‘public cloud-first’, as AT&T has stated, will also be a common strategy.
The migration of the network to a public or hybrid cloud is more uncertain for most. It makes sense to deploy virtualized RANs, in particular, first on the telco’s own infrastructure (or that of a key vendor), giving it full control in the first phases when it is almost certain to have to do extensive tuning and optimization.
Over time, as these network functions mature and are better understood, the end goal of a fully automated, programmable, dynamic network should be achieved, and at that point, there is no reason not to move the RAN and core to the public cloud too.