FASTWEB S.p.A.

Via Caracciolo 51
Milan,
Italy
Telephone: ( + 39) 02 45451
Fax: ( + 39) 02 45452333
Web site: http://www.fastweb.it

Public Company
Incorporated: 1999 as e.Biscom
Employees: 2,994
Sales: EUR 967.8 million ($1.24 billion) (2005)
Stock Exchanges: Milan
Ticker Symbol: FWB
NAIC: 517910 Other Telecommunications

FASTWEB S.p.A. (Fastweb) is one of Italy's top telecommunications companies and a pioneering IP (Internet Protocol) services provider. Fastweb offers a range of fixed-line services through a fiber-optic network reaching more than 110 of Italy's largest metropolitan areas, and a potential customer pool of more than 8.5 million by 2006. The company has also launched an extension of its network, designed to extend its reach to some 50 percent of the country's population by 2010. As Italy's first "triple play"—Internet, telephony, and television access—provider, Fastweb had attracted more than 715,000 customers by early 2006. The company's control of its own fiberoptic network gives the company the bandwidth needed to offer a wide range of services to both consumer and corporate markets.

The company's services include virtual private networks, video-conferencing, video telephony and video surveillance, and digital and interactive television, video-on-demand, and record and replay packages, among others. Founded in 1999, Fastweb has been listed on the Milan stock exchange since 2000, and has been part of the S&P/MIB 40 index of the top 40 quoted Italian companies since 2003. Fastweb is led by Silvio Scaglia, architect of Omnitel (later acquired by Vodafone), Italy's second largest cellular telephone provider. In 2005, Fastweb posted revenues of nearly EUR 1 billion ($1.2 billion).

HIGH SPEED NETWORK FOR THE
NEW CENTURY

The founding of Fastweb's predecessor, e.Biscom, in 1999 proved somewhat of a hallmark in the run-up to the IP boom of the mid-2000s. Founded by Silvio Scaglia and Francesco Micheli, e.Biscom focused on building its own fixed-line fiber-optic network at a time when the telecommunications industry had turned its attention to the fast-growing mobile telecommunications market. Yet Scaglia and Micheli had recognized the limitations of wireless technology.

Both men had strong backgrounds in the mobile market. Micheli had founded Omnitel Pronto Italia in 1992; Scaglia, who had previously turned around Vespa scooter-producer Piaggio, had joined Omnitel in 1994, transforming it into Italy's second largest cellular phone provider. This experience, however, convinced Scaglia of the future viability of fixed-line telecommunications. As he told Forbes: "I also knew, despite the predictions that the fixed-line world was finished, that there were things wireless could not do. High-quality video, for example, and the problem of a stream of high-speed Internet activity." Scaglia recognized the strong potential of IP-based telecommunications. As he told Handelsblatt in 2000, "In five years, we'll prove that broadband internet is the dominant infrastructure." Following Olivetti's acquisition of Telecom Italia, leading to Omnitel's sale to Vodafone, Scaglia and Micheli joined together to form e.Biscom.

Scaglia and Micheli quickly lined up a number of early investors, seduced by their proposal to build their own fiber-optic network across Milan, and then Italy. The company also put into place a number of strategic partnerships. Perhaps the most important among these was an agreement with newly privatized Milan electricity provider AEM to build a fiber-optic network based on AEM's existing electrical infrastructure. The agreement, placed under a joint venture called Metroweb, enabled e.Biscom to avoid the huge expense of digging its own infrastructure. At the same time, with AEM controlling two-thirds of Metroweb, e.Biscom was relieved of the largest part of the cost of laying out the fiber-optic network.

The partnership with AEM also led to the creation of another, still more important joint venture, Fastweb, which functioned as the broadband services provider for the Metroweb network. Fastweb was held at more than 55 percent by e.Biscom directly, while the remainder of its shares were divided among AEM and Fastweb management.

In addition to developing the group's infrastructure, e.Biscom also arranged a series of partnerships in order to build a strong content portfolio. As such the company joined with Italian state-run television giant RAI, giving Fastweb customers access to RAI's archives and current television programming. The company forged deals with newspaper publisher Il Sole-24 Ore and news services provider Associated Press. E.Biscom also reached an agreement with film production company Mikado, allowing the company to offer Mikado's vast film library as part of its video-on-demand service.

An important milestone for Scaglia and Micheli came in 2000, when the company raised more than $1.6 billion in an initial public offering (IPO), listing just 12 percent of the group's stock on the Milan stock exchange. The company's timing proved fortunate; soon after, the collapse of the global market for high-technology stocks would have doomed the group's IPO. Instead, e.Biscom had armed itself with a cash treasury of more than $1.1 billion, enabling the company to survive, and even thrive, during the worst moments of the difficult entry into the new century.

E.Biscom began rolling out its Fastweb service in late 2000, and by the end of the year had signed on more than 5,000 customers. Fastweb quickly added its television service, becoming the first in the world to offer Internet protocol television (IPTV) technology to its customers. The company also made an early attempt to branch out, forming its own content subsidiary, e.BisMedia, which launched a successful online magazine, Il Nuovo. The company added a retail operation, E-Voci, which sold mobile telephones and computers. In August 2000, e.Biscom also made an attempt to replicate its model on an international level, paying $220 million in order to acquire 80 percent of Hamburg-based HanseNet Telekummunikation. By 2003, however, e.Biscom had reoriented its strategy, refocusing on Italy and on the fast growth of its Fastweb operations; in that year, the company sold HanseNet to Telecom Italia for EUR 250 million.

Encouraged by the success of Fastweb in Milan, e.Biscom began extending its fiber-optic network to other markets, and especially the larger cities in the more affluent north Italian region. As such, the company rolled out operations in Turin and Genoa in 2001. The company also made plans to enter the important Rome market, paying Poste Italiane $8.5 million in order to send its fiber-optic lines through the subterranean network of pneumatic tubes formerly used by the Italian post office. In this way, e.Biscom avoided building in one of the world's most notoriously difficult construction zones, where major projects often ended as archeological digs. Meanwhile, e.Biscom's commitment to the fixed-line market allowed it to bypass the high-priced bidding wars for the next-generation mobile telephone market.

COMPANY PERSPECTIVES

Fastweb: the world you have in mind. Fastweb is the main broadband telecommunications company in Italy. Thanks to its fully IP architecture and the selective use of both fiber optics and DSL, Fastweb has optimized the delivery of converged services including voice, Internet and television over a single broadband connection.

SOCRATIC VICTORY IN 2001

E.biscom scored a major victory in its quest to extend its reach to a national level when it won a court battle forcing Telecom Italia to open up its Socrate network to e.Biscom's fiber-optic network. The Socrate infrastructure had been built by Telecom Italia in order to launch a cable television service in the 1990s. Telecom Italia subsequently abandoned its cable plans, and instead bought a satellite station in 2001. This purchase provided e.Biscom with the leverage to gain access to the Socrate network, which provided it with access to nearly every major Italian city. The two sides worked out a duct sharing agreement in 2002.

Fastweb's subscriber base grew strongly, jumping from 49,000 at the end of 2001 to nearly 180,000 by the end of 2002. By 2003, Fastweb had signed up over 330,000 customers, and had branched out into Naples and Bologna as well. The company's growth was further aided by a particularity of the Italian television market, in that the country lacked cable television services. Fastweb's attractive bouquet of Internet access and telephone and television services allowed the company to attract customers away from the country's satellite television groups. By the end of 2003, Fastweb had completed its IPTV package, adding true video-on-demand, as well as broadcast and satellite television programming over its DSL-based network. The result was a surge in consumer demand, and by the end of 2004, the company's subscriber base neared 500,000. In that year, also, the company's stock was added to the prestigious S&P/MIB index of 40 blue chip Italian stocks.

Fastweb by then had become the major focus of the e.Biscom group. The company began acquiring a larger stake of Fastweb shares. By 2004, e.Biscom had completed a stock swap agreement with AEM. e.Biscom gained full control of Fastweb, while AEM became a shareholder in e.Biscom instead. In May 2004, Fastweb and e.Biscom were merged together, and the surviving company took on the name of Fastweb S.p.A.

Fastweb emerged as a worldwide leader in the IPTV revolution at mid-decade, offering an impressive, and largely unrivaled, range of services. As Scaglia had forecasted, the company's triple play offering had shifted the momentum of the telecommunications market from traditional fixed line networks and even from wireless technology to the flexibility of the high-speed fiber-optic network. The company continued to boost the top speed of its network, raising the bar to 20 Mbits per second on download, and to 1 Mbit per second on upload through its ADSL 2 + offering in 2006. The company's commitment to expanding its offering helped it to expand its customer base; by the end of 2005, the company's subscriber ranks had swelled past 714,000, an increase of some 44 percent in just one year.

While much of Fastweb's growth came through its rising numbers of residential subscribers, the company also successfully attracted a growing number of corporate customers. In 2006, for example, the company signed a contract to become Italian banking giant Unicredit's "technological partner," including an agreement to provide a virtual private network (VPN) connecting Unicredit's nearly 3,000 branches. The contract with Unicredit was estimated to be worth more than $102 million. Also that year, the company signed a four-year contract to provide data transmission and telephony services to Poste Italiane.

KEY DATES

1999:: Silvio Scaglia and Francesco Micheli found e.Biscom in order to develop a fixed-line, broadband fiber-optic network in Italy; company reaches an infrastructure agreement with AEM in Milan, and launches Fastweb joint venture with AEM to develop IP services.
2000:: e.Biscom goes public on the Milan exchange and launches Fastweb in Milan; acquires HanseNet in Hamburg, Germany.
2001:: e.Biscom begins extending network to other Italian cities, including Turin and Genoa, and signs agreement to use Poste Italiane's pneumatic tube network in Rome.
2002:: e.Biscom signs agreement with Telecom Italia, gaining access to national Socrate duct network.
2003:: e.Biscom sells HanseNet to Telecom Italia as part of refocusing on Fastweb operations.
2004:: e.Biscom acquires full control of Fastweb; the two companies then merge under the Fastweb name.
2005:: Fastweb subscriber base tops 700,000, an increase of 44 percent in one year.
2006:: Fastweb announces plans to extend its network to reach 50 percent of the Italian population by 2010.

With sales approaching EUR 1 billion ($1.2 billion) and its subscriber base topping 750,000, Fastweb remained a prime contender in the Italian telecommunications market at the end of 2006. The company also unveiled plans to boost its range of operations, launching plans to roll out its network in order to reach more than half of Italy's population by 2010. Nonetheless, a number of observers had begun to question the company's future growth prospects in the heavily competitive Italian market, and particularly as market leader Telecom Italia prepared to roll out its own IPTV service. With Silvio Scaglia remaining at the company's helm, however, Fastweb appeared likely to meet its future challenges.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

B2Biscom S.p.A.; e.BisMedia S.p.A.; FastWeb Finance S.p.A.; FASTWEB Mediterranea S.p.A.

PRINCIPAL COMPETITORS

Wind Telecomunicazioni S.p.A.; Nokia Italia S.p.A; SITE S.p.A.; BT Albacom S.p.A.; CDC S.p.A.; Urmet Telecomunicazioni S.p.A.; Sky Italia S.R.L.; Euphon S.p.A.; Infostrada S.p.A.

FASTWEB S.p.A

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