AGCom’s latest “Focus bilanci 2020–2024” on electronic communications paints a picture of a mature but financially strained Italian telecom sector. Aggregate revenues are essentially flat over the period, at around €28.6 billion in 2024, with a slight year‑on‑year decline and more than three quarters of turnover concentrated in a handful of large retail operators. 

Operating margins recovered in 2024: the sector EBITDA margin increased, supported by lower operating and personnel costs, and the EBIT margin turned positive again, although it remained well below 2020 levels. At the same time, telecoms continue to invest heavily: capex is roughly stable at about €7.1 billion in 2024, corresponding to an investment intensity of around 25% of revenues, a ratio that has been broadly constant throughout 2020–2024. 

Despite this, the return on equity is structurally negative. Over 2020–2024, the sector’s average ratio of net profit to equity stands at about -6.3%, with -8.6% in 2024, meaning that shareholders’ capital is being eroded rather than remunerated. The capital structure is relatively stable, with equity representing around 29% of total liabilities, but large retail operators show even worse returns on equity than smaller players. In other words, the core of the system – mass‑market fixed and mobile operators – is under particular financial pressure. 

This combination of flat revenues, high and persistent capex, and negative returns on equity raises an obvious question: how can the sector sustain the investments needed for fibre, 5G and digital transformation, while also delivering a reasonable return to investors?

Five angles for a more balanced debate

Discussions about “solutions” are often dominated by the industry’s own agenda: less competition, fewer obligations, more subsidies. That perspective matters, but it is not the whole story. Any credible response has to balance at least three viewpoints: operators, regulators/government, and users/citizens. Against that backdrop, five points seem particularly important.

1. Recognise that not all problems are regulatory

The crisis in profitability is not only a matter of regulatory burden or “too much competition”. Operators have made their own strategic choices:

• aggressive leverage and complex M&A, often driven by financial rather than industrial logic, have left balance sheets fragile and interest costs high.
• commercial strategies have relied heavily on price wars and undifferentiated offers, pushing ARPU down without building strong value propositions in quality, services or innovation.
• governance has often reflected the priorities of short‑term financial shareholders, rather than a long‑term view on return on capital employed (ROCE) and service quality.

Part of the “cure” must therefore be endogenous: better capital discipline, more selective capex, and business models that do not rely solely on undercutting prices.

2. Keep competition effective, but not purely price‑driven

On the regulatory side, the key challenge is to preserve effective competition without locking the sector into a race to the bottom on prices alone. That implies:

• using the EU framework on wholesale access and symmetric obligations to promote infrastructure sharing where it makes economic sense, while keeping markets contestable also thanks to asymmetric access when needed.
• designing remedies and merger control in a way that allows efficient consolidation where justified, but with clear safeguards against excessive market power and unjustified price hikes.
• steering competition towards quality, coverage, and innovation – for example through transparency tools, quality‑of‑service metrics, and well‑targeted ex ante obligations – instead of focusing only on headline tariffs.

The goal is not to “protect operators from competition”, but to ensure that competition supports long‑term investment and innovation rather than short‑term under‑pricing.

3. Use public funds and incentives to correct market failures, not to subsidise shareholders

Public support and EU funds (PNRR/RRF, state aid for broadband ecc) can play a legitimate role in areas where market‑driven investment is structurally insufficient, such as rural and low‑density regions. But this support should:

• be strictly targeted at genuine market failures and tied to clear, enforceable commitments on coverage, wholesale access and affordable pricing.
• avoid becoming a de facto transfer to existing shareholders, particularly when operators are controlled by financial investors with limited appetite for long‑term industrial risk.
• be integrated into a broader digital‑policy strategy, rather than treated as one‑off injections of cash with weak accountability.

Done well, this can reduce the investment gap without crowding out private capital or distorting competition.

4. Improve regulatory predictability and governance incentives

Given the long life of telecom assets, regulatory uncertainty directly feeds into a higher cost of capital. Regulators and policymakers can help by:

• providing stable, transparent frameworks for fixed‑network access, spectrum renewal, and infrastructure sharing over a multi‑year horizon.
• clarifying expectations on coverage obligations and quality standards so operators can plan capex with a reasonable degree of confidence.
• at the same time, encouraging business models where management incentives are aligned with long‑term ROCE, service quality and financial resilience, not just short‑term share price or dividend metrics.

Predictability is not a concession to operators; it is a precondition for sustainable investment in an essential infrastructure.

5. Factor in labour, skills and social outcomes

Finally, financial metrics do not tell the whole story. The sector’s restructuring has gone hand in hand with significant employment reduction and pressure on working conditions, especially in customer‑facing and field roles. A sustainable path forward should include: 

• active labour‑market policies and re‑skilling programmes to support workers affected by automation, network rationalisation and consolidation, particularly towards cloud, cybersecurity and data‑driven roles.
• social dialogue on how productivity gains and public support are shared between shareholders, workers and users, rather than translating only into debt reduction or short‑term payouts.

This is not just a social add‑on: a sector that systematically compresses labour and service quality to close its financial gap will struggle to maintain public and political support for the reforms it is