Sirti S.p.A.

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Sirti S.p.A.

Via Stamira d'Ancona 9
Milano
Italy
Telephone: +39 02 95881
Fax: +39 02 95883333
Web site: http://www.sirti.it

Public Company
Incorporated: 1921 as Società Italiana Reti Telefoniche Interurbane
Employees: 4,725
Sales: EUR 456.4 million ($550 million) (2004)
Stock Exchanges: Milan
Ticker Symbol: SIT
NAIC: 334210 Telephone Apparatus Manufacturing; 334220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; 334290 Other Communication Equipment Manufacturing

Sirti S.p.A. specializes in developing telecommunications networks and systems. The company's operations span the full range of services, from design and engineering, to the physical deployment of cable-based and wireless networks, to their maintenance. Sirti's expertise includes fiber optic networks, satellite link base stations, digital television transmission networks, and wireless communications systems. The company also builds traffic control networks for highways and railways, and electrical power trans-mission and distribution networks. The company, formerly part of Telecom Italia, remains Italy's leading provider of telecommunications networks, and is also a world-leading specialist in this sector. In the mid-2000s, Sirti's maintenance operations oversaw more than 35,000 miles of fiber optic cable, and more than 2.5 million access lines. Sirti also develops software and provides software support services for its network operations. Since the 1990s, the company has worked to reduce its reliance on Italy and Telecom Italia. The company has operations in Spain, through subsidiary Seirt, and also operates a subsidiary in Argentina, through which Sirti has established a base for expansion into the rest of the South American market. The company also has subsidiaries in France and Switzerland, and holds stakes in Sirti-branded joint ventures in the United Kingdom and Germany. Telecom Italia sold Sirti in 2000 to the Wiretel investment consortium including Techint S.p.A. and Stella International S.p.A., as well as the Benetton family's 21 Investment, among others; in 2005, Wiretel sold 69.5 percent of Sirti to a buyout partnership involving fellow Sirti shareholders Clessidra SGR and Investindustrial. Clessidra and Investindustrial have indicated their interest in acquiring full control of Sirti.

Cabling Italy in the 20th Century

Sirti had its origins in the years following World War I, when Piero Pirelli, of the Pirelli industrial empire, and Vitorrio Teschino founded a company in order to lay cable and provide long-distance connections among Italy's cities. Founded in 1919, the company was formally incorporated as a limited liability company in 1921 under the name Società Italiana Reti Telefoniche Interurbane.

Sirti's primary customer was the telecommunications bodies set up under the auspices of the Ministry of Post and Telecommunications, and the Italian PTT later became not only Sirti's only customer, but also its parent company. Sirti's first project was the construction of a telephone network linking the cities of Milan, Turin, and Genoa. Through the 1920s and 1930s, the company remained a privileged partner of the PTT, responsible for connecting many more of the country's cities into a unified national telephone market. A major project for Sirti came in 1932, when the company deployed a 270-kilometer undersea cable connecting the island of Sardinia with the Italian mainland. Sirti also followed the Italian PTT in its operations over-seas, becoming a telecommunications infrastructure specialist.

The post-World War II economic boom and the rise in demand for telephones in Italy placed Sirti at the forefront of the growing national telecommunications market. Placed under the national telecommunications entity, STET, Sirti played a primary role in the modernization of the country's telephone system, and in turn in the country's modernization in general. During the 1950s, Sirti began developing a new telephone network combining coaxial cable technology with radio-based wireless technol-ogy. Work on the network continued through the 1960s. STET's position in overseas markets, including its longstanding operations serving the Latin American markets, also gave Sirti continued access to those markets over the next decades.

Nearly all of the company's revenues came from Italy, however, and was based on its work for just two customers, SIP and ASST, both parts of STET. The company nevertheless enjoyed steady turnover growth—by as much as 20 percent and more per year into the 1990s—and even posted double-digit net profit growth. The decision to upgrade Italy's national telephone network, replacing the coaxial network with fiber optic cables, played a large role in Sirti's growth. Launched in the 1980s and continued into the 1990s, the "Eighties Project," as it was called, involved not only the replacement of the country's phone cables, including across the mountainous regions as well as the submarine lines connecting Sicily and Sardinia to the mainland, but also a networkwide upgrade of the country's terminals and related switching and transmission infrastructure for future digital compatibility.

Into the mid-1990s, however, as the Italian government began making progress toward the privatization of the country's telecommunications sector, Sirti began a quest for diversifying its operations, both geographically and in seeking other areas of operations. As part of the group's effort to expand, Sirti entered a number of new markets during the 1990s, including France, Spain, and Germany, as well as the East European market, and, through a subsidiary in Argentina, the South American market. The company supported this effort with the acquisition of a number of smaller companies as well as through the creation of joint ventures. The company entered Portugal, for example, after Spanish subsidiary Seirt acquired a small company there, broadening Sirti's reach to the whole of the Iberian peninsula.

As a result of Sirti's internationalization effort, the company reduced its Italian revenues to just 83 percent of its total by 1993, and to approximately 70 percent by 1997. Yet Italy remained the group's sole source of income for much of this time, as its foreign operations, such as Sirti's U.K. operations, set up as a joint venture, struggled to gain a foothold in the new markets.

Europe became a natural target for Sirti's expansion. Yet Sirti's ability to acquire scale on the continent was hampered by the fact that during the period, Sirti was the only specialist company of its kind. As a result, the company found no acquisition opportunities of a significant size. Instead, the company continued its expansion by organic growth, as well as completing smaller acquisitions and through establishing partnerships. Already in the 1980s, the company had formed a partnership with Olivetti, called Eurolan, which specialized in the development and deployment of local area networks. Sirti also developed an expertise in developing network management systems and the customized software needed to guide them.

Independent in the New Century

Through the 1990s Sirti's range of operations expanded to include Poland, where, in 1995, the company won a contract worth ITL 22 billion to install a 1,400-kilometer fiber optic network in Poland. The company also had entered the Middle East, leading a consortium to win a $100 million contract to construct a fiber optic telephone network in Beirut from Siemens AG. Meanwhile, Latin America, supported by the group's base in Argentina, remained a primary foreign market for the company. By the mid-2000s, Sirti had become active in Brazil, Chile, and Bolivia. Elsewhere, the company completed contracts in Saudi Arabia, Gabon, Libya, and Egypt.

The Italian government, in the meantime, had been preparing the much-anticipated privatization of the country's telephone monopoly, regrouped and renamed as Telecom Italia in the mid-1990s. As part of Telecom Italia's own effort to become a leading global telecommunications player, the company began a program of selling off its noncore operations, including Sirti.

By 1995, the Italian government had reduced its stake to just 49 percent. A first effort to complete the privatization was made in 1997, when Telecom Italia began negotiations with the Pirelli group, a deal that would have brought Sirti full circle, as it were. By the end of the decade, however, the two sides were unable to agree and the deal fell through. Instead, Telecom Italia sold its remaining share of Sirti to a consortium, called Wiretel, led by Techint S.p.A., the Italian steelmaker, which also had extensive operations in Latin America. Other members of the consortium included Stella, the Italian timber group, and the Benetton family's investment vehicle, 21 Investimenti.

Under its new owners, Sirti focused its efforts on expanding its operations in Italy and Spain, especially. The company recognized the emergence of new technologies—such as high-speed and wireless Internet transmission, and the emergence of digital television broadcasting—and new markets. One of these was the railway market, which offered a built-in potential for network development. Sirti also expanded into the satellite broadcasting and transmission networks, as well as military network applications.

Company Perspectives:

Sirti: tradition and innovation in telecommunications. Sirti is the Italian leading company in engineering and realization of telecommunication networks and systems. The wide experience achieved and the in-depth technical expertness allow Sirti to provide customers with solutions of a high technological level in the different segments of telecommunications and ICT. All those who need a strategic asset, such as a network infrastructure aimed to business development, for instance telecommunication operators both incumbent or newcomers, big public or private users, such as Public Administration, Railways, Public services providers, great Corporations, find Sirti as the perfect partner able to analyze all problems and propose solutions tailored both on the technological and economic point of view. To achieve these targets, Sirti has set up an operating organization spread on the national territory, ready to timely and effectively react, and that is able to manage the project in the strictest respect of the time scheduled.

By 2005, Sirti had successfully shed its former reliance on Telecom Italia and had emerged as a truly independent—and international—company. With its sales rising to EUR 456 million ($550 million), up from approximately $100 million at the beginning of the decade, Sirti had become a major international specialist in telecoms engineering and services. Sirti also had found new owners as it turned toward the mid-century. In 2004, an investment partnership between Clessidra SGR and Investindustrial agreed to buy Wiretel's 69.5 percent of Sirti. The new majority owners of the company then announced their intention to buy out Sirti's minority shareholders as well. With more than 70 years of experience, Sirti prepared to extend its network expertise into the 21st century.

Principal Subsidiaries

EPlanet S.p.A. (22.85%); Seirt SAU (Spain); Setelco Lugano Fr. (Switzerland); Sirti Argentina S.A.; Sirti GmbH (Germany; 19%); Sirti Ltd. (U.K.; 20%); Sirti Progetto Reti S.p.A.; Sirti S.A. (France); Sirti Sistemi S.p.A.

Principal Competitors

Bechtel Group, Inc.; Autostrade—Concessioni e Costruzioni Autostrade S.p.A.; Eiffage S.A.; Autoroutes du Sud de la France; Telindus Group N.V.; Dycom Industries, Inc.

Key Dates:

1919:: Piero Pirelliand Vitorrio Teschino found a company in order to lay cable and provide long-distance connections among Italy's cities.
1921:: The company is incorporated as Società Italiana Reti Telefoniche Interurbane.
1932:: A submarine cable is laid, linking Sardinia to the Italian mainland.
1950s:: The company develops a new coaxial cable- and radio-based telecommunications network in Italy.
1980s:: The "Eighties Project" begins, replacing Italy's telephone network with fiber optic cables and a digital-ready infrastructure.
1995:: The Italian government, through STET (later Telecom Italia), sells 51 percent of Sirti.
2000:: Telecom Italia sells the remaining share to a Wiretel investment consortium.
2005:: An investment partnership between Clessidra SGR and Investindustrial LP acquires Wiretel's 69.5 percent stake and announces its intention to buy out the minority shareholders.