The Day of Omnitel

On 29th March 1994, in its final act, the Italian Council of Ministers headed by Prime Minister Carlo Azeglio Ciampi decided to award the license to run Italy’s first privately-owned mobile phone network to Omnitel-Pronto Italia.

It feels appropriate to mark the 30th anniversary of such a dramatic moment.

I remember it clearly, in the Ivrea office of the Omnitel CEO Francesco Caio as he waited on the phone line for news of the decision from Rome as the evening minutes ticket by. He paced back and forth, clutching a phone receiver tethered by a special 4m curly cord to his desk phone like some extraterrestrial lifeline. And the moment when it came - the culmination of so many years of preparation, investment, work and sheer hope, and in the teeth of huge political risk.

Our principal competitor was a consortium including Vodafone and led by Mediaset, a huge business controlled by Silvio Berlusconi.? And Berlusconi would become Prime Minister the very next morning.

This decision was taken in a period of virtual revolution in Italy.? Ciampi was an apolitical technocrat - he had been the respected head of the Italian central bank and would later become President of the Republic. Since mid-1992 Italian politics has been in turmoil, up-ended by the destabilisation resulting from the fall of the Berlin Wall, the combine-harvester of the Mani Puliti anti-corruption investigation which implicated most of the political class, and the traumatising campaign of Mafia violence that began with the murder of Giovanni Falcone in May 1992. The entry of Berlusconi - until then, a successful media, advertising and real-estate tycoon - into politics was a further huge shock to the system, followed by the victory of his new Forza Italia party in the 1994 general election.

Simultaneously European telecommunications were being rapidly and radically transformed, by technology and by the European Commission. Mass digitalisation of conventional telecoms networks was accompanied by the advent of digital cellular communications powered by the shiny new, world-leading, European GSM standard.? The European Commission, led by the radical Jacques Delors, was determined to break the ossified monopolies of state-owned PTT (Post, Telegraph and Telephone - hard to believe today!) administrations by introducing competition into national telecoms networks. The PTTs, centres of immense power, patronage and resources, were not very happy about this.? In Italy the sector was fragmented and the efforts of the monopoly operator SIP to keep deregulation at bay foundered with the advent of the Ciampi government.? Thus Italy announced in December 1993 that bids were requested for the first monopoly-busting telecoms license for a new GSM network.

It was clear this would be a huge new industry, and it attracted the attention of two titans of Italian industry.? On one side there was Berlusconi, who had made most of his fortune by deftly driving and navigating the deregulation of national television in the 1980’s, helped by his friend the Socialist Party leader Bettino Craxi. His Mediaset had built a national TV production, distribution and transmission network, with great technological and operational resources, and it understood Italian consumers so well that it convinced them to elect Berlusconi’s right-wing coalition in March 1994.? As well as great charm, Berlusconi had a reputation for ruthlessness - subsequent trials would examine several accusations of bribing judges to swing judgements his way.?

On the other side was Carlo De Benedetti. An insider's outsider, he had gone from heir apparent at Fiat to a left-of-centre lone wolf, who regarded Italy’s business elite as provincials and had been thwarted in his attempt to take over most of Belgium in 1988. Since 1979 he had controlled and run Olivetti, from its foundation in 1908 until the early 1960s also an outsider with an unorthodox leftish tradition. By the mid 1980s it had become the world's second largest producer of personal computers (PCs), remarkably few of which were bought by Italy’s national government in Rome.? Now it was time to make the next big leap in technology - into mobile communications.

De Benedetti paid close attention to the advice of Elserino Piol, his vice-chairman. Piol (who died in 2023) was a legend in Olivetti, credited with saving its world leadership in desktop computing in 1964 and building its relationship with AT&T in the 1980s. Piol understood what was going to happen in mobile communications, and the role Olivetti needed to play. Already in 1989 he had financed Olivetti’s participation in bids for the D2 license in Germany and for a UK PCN 1800MHz mobile license.? As a young engineer, I was part of those contributions. In 1990, Piol formed Omnitel together with Lehman Brothers and some international industry partners.

So when, on 15th December 1993, the starting gun for the license competition in Italy was fired, Olivetti was ready. De Benedetti had hired a young consultant from McKinsey, Francesco Caio to lead the effort.? Francesco was remarkable in many ways, not least his ability to swear idiomatically and accentlessly in English.??

As I had a minor role in the Omnitel story there is much I don’t know about the lead-up and background to this bid. The first I heard was a phone call that day from Francesco summoning me to an empty Olivetti printer factory on the outskirts of Ivrea (“this place looks like it's been neutron-bombed by the Japanese!” was one team-member’s tasteless but apposite remark). Apart from a very few hours’ sleep each night, that building became permanent home to all of the team members until the bid was submitted at the end of February.

Under Francesco there were two people who particularly impressed me. The finance head Pier Paolo Cristofori had won the Gold Medal for pentathlon in the 1984 Los Angeles Olympics Games. I recall he could work ceaselessly for 48 hours without losing his sense of humour. And the commercial head Vittorio Colao, a fellow about my age who seemed both utterly brilliant and extremely charming. Appearances were not deceptive - his name became well known in later years.

This is not the place to tell the full story of the Omnitel bid, and its 11th hour merger with rival Pronto Italia (I recall the arrival of a dozen boxes of documents, whose contents required integration with ours within a couple of days).? One story in particular, regarding the bid sum of €750m, is utterly extraordinary but courtesy demands the consent of the protagonist for it to be told.

However it must be noted that the bid committed Omnitel-Pronto Italia to cover 95% of the nation’s territory by 1998, a promise that was subsequently written into its license as a binding condition.? This caused a great deal of controversy in the consortium - I know because I wrote it.

The result was that Omnitel - and through competitive pressure Telecom Italia - covered the beaches, forests and mountains of Italy to an extent perhaps unmatched elsewhere, and in record time.? By comparison, according to Ofcom the UK only reached this level of coverage (for voice & text only) in 2018.

The bid was judged on the basis of seven criteria - technical, commercial, operational, financial.? We knew that failure to win on even one of these points would open Ciampi’s last decision up to judicial challenge by Berlusconi - and we were not confident of the outcome in such an eventuality.? The result had to be a slam dunk: 7/7.

And it was.? One of the criteria, the bid sum offered, at €750m was around 5% higher than Berlusconi's bid.? Of course there was an attempt to challenge the result anyway, but it failed at an early hurdle. Omnitel-Pronto Italia was on its way.

Francesco and his team did an extraordinary job of building Omnitel in record time. Its license was granted in November 1994, it accepted its first customers in December 1995 and by October 1997 it had 1.75m subscribers.

Subsequently, upon the purchase by Olivetti of Telecom Italia, Omnitel was sold to Mannesman (the D2 licensee) and then incorporated into Vodafone.? Vodafone Italia was bought by Swisscom in March 2024.

Following his successful leadership of Omnitel, Francesco Caio went on to have an extraordinary and eventful career. Many others involved in building Omnitel became noted leaders in their fields.