Lisa Jucca

Italian ambitions. Swisscom is attempting to make big money in one of Europe's least profitable telecom markets.

Italian ambitions. Swisscom is attempting to make big money in one of Europe’s least profitable telecom markets. The $30 billion Swiss telecom operator pledged on Friday to deliver 600 million euros of annual savings from splicing its 8 billion euro purchase of Vodafone’s hard-pressed Italian operations with its own Fastweb unit. To succeed, the synergies will need to materialise, and Italy’s highly competitive mobile market probably also requires further consolidation.Swisscom CEO Christoph Aeschlimann does not lack ambition. After beating Iliad’s founder Xavier Niel in the race to get Vodafone, he is now promising investors he can double operating free cash flow of the merged entity to 1.1 billion euros by generating savings worth 5.5 billion euros once taxed and capitalised and before integration costs. He also looks to have a path to achieve that.Aeschlimann can save 240 million euros per year by removing the current cost to Fastweb of reselling wireless communication to consumers, and also some fixed-network access expenses. Being more efficient on capital expenditure should save another 60 million euros. And about 150 million euros will come from removing some job overlaps as well as cutting duplications in IT and retail shops. More importantly, Swisscom will save 150 million euros a year by paying less for services Vodafone provided to its Italian unit.Even so, Swisscom’s market cap has risen by less than 1 billion Swiss francs since the two companies confirmed they were in talks at the end of February. That may be because investors are discounting the synergy goodies. Throw in 700 million euros of integration costs, and the need for Swisscom to pay 350 million euros to Vodafone in the first year and then a tapering amount until it replaces its centralised services, and the savings’ value is more like 4.5 billion euros, Breakingviews calculations show. Meanwhile, investors will receive the full benefits only after 2029.The more pressing issue, however, is that the Swisscom acquisition does not resolve a vexing problem. At less than 12 euros of average revenue per consumer, the Italian market is one of the least lucrative in Europe. Vodafone’s business is concentrated in the least profitable consumer segment and had been losing revenue for years. Since Swisscom’s Italian operator Fastweb is chiefly a fixed-line operator, the acquisition does not really remove a large mobile player from the market. The new group will be stronger but will still have to compete against Telecom Italia, disruptor Iliad and WindTre.Swisscom’s Italian move is a logical first step. But to improve its long-term prospect in Italy, some of its competitors probably need to merge too.

Leading a turnaround under the scrutiny of investors is not for the faint-hearted. On Tuesday, French luxury group Kering said quarterly sales at its top Gucci brand were likely to fall nearly 20% from a year ago, triggering a 14% slide in the $49 billion conglomerate's share price. The unexpected announcement, a month before the company's scheduled results, suggests the revamp of the century-old

Ignacio Galán is playing it safe. In Iberdrola's updated three-year business plan, the veteran executive chairman of Europe's largest utility has earmarked 36 billion euros of net investments by 2026. Most of the cash will go into upgrading and expanding ageing power grids, and about a third into the United States. Both are perceived as safer investment options than the renewable projects on which

European banks have learnt the hard way that upsetting Uncle Sam is a bad idea. BNP Paribas, for example, in 2014 agreed to pay $9 billion to settle claims that it violated U.S. sanctions.

Ignacio Galán is playing it safe. In Iberdrola’s updated three-year business plan, the veteran executive chairman of Europe’s largest utility has...

Late bloomer. Claudio Descalzi is steering a different course to most European oil bosses.

Cable maker Prysmian is once again in expansion mode. Six years after swooping on General Cable, the acquisitive $15 billion manufacturer of electric wires and fiber connections has agreed to buy smaller U.S. rival Encore Wire for about $4.2 billion. The deal does not come cheap. Yet a stronger presence in the larger and more attractive North American market should provide a sparky antidote to the

Growing apart. The world of luxury is increasingly a tale of the haves and the have-nots.

Growing apart. The world of luxury is increasingly a tale of the haves and the have-nots. Bernard Arnault’s $420 billion Tiffany-to-Dior conglomerate LVMH sent a sobering message on Tuesday as it unveiled a 3% year-on-year rise in first-quarter sales ignoring currency moves – well below the 13% expansion for 2023 as a whole. After two post-Covid boom years, the French behemoth and its bling peers are facing a phase of revenue stagnation. As growth flattens, a pre-existing gap between winners and losers may widen.Investing in European luxury used to be a one-way bet. Considered defensive due to their supposedly more resilient customer base, these stocks tended to attract investors even in times of crisis. Shares in LVMH, for instance, rose 50% between 2007 and 2012 even as the aftermath of the global financial crisis prompted a 35% fall in the STOXX Europe 600 Index, LSEG data show. In the following decade, LVMH rose 450% compared to a rise in the European stock market benchmark of only 80%.The past few months show a different trend. Rising inflation and a slowdown in China, which together with other Asia-Pacific markets represents around 40% of global luxury sales, have eaten into shoppers’ purchasing power. But the impact has been uneven. While ultra-luxury brands like $255 billion Birkin bag purveyor Hermès International and $7 billion “king of cashmere” Brunello Cucinelli continued to attract buyers, more challenged brands like Kering’s Gucci, Burberry and Salvatore Ferragamo – which rely on less affluent shoppers and are trying to reinvent themselves with new designers – have struggled to woo shoppers.LVMH, which also sells jewellery and wine and whose top brand Louis Vuitton shares exclusivity traits with Hermès, should continue to be classed as a winner despite its pedestrian first quarter. But for the luxury sector as a whole, like-for-like revenue is on average expected to stay flat in the first quarter, the worst quarterly performance since the end of 2020, and rise just 2% in the next, Bank of America estimates show. That suggests the sector’s sales growth could be half the 9% or so recorded last year and way off the double-digit expansion seen in 2022. With less growth to go round, the overall numbers may hide some markedly different trajectories. While Cucinelli sales are forecast to jump 13% this quarter, Burberry’s are seen slumping 12%, according to Visible Alpha estimates.Some of these considerations have started to feed into luxury stock prices: Burberry and Ferragamo shares are down around 20% since the start of the year, Hermès is up 20%, while LVMH lies in between, up 8%. The polarisation is unlikely to disappear: Gucci’s struggles suggest brand name alone is no guarantee of eternal success. The risk is that some famous designers end up in the bargain bin.