Industrial Plan 2020-2023

Rai Way has approved the 2020-2023 Industrial Plan, which describes the company's development guidelines and sets economic and financial targets to 2023.

Market Context

The market Rai Way operates in is influenced by trends which are characteristic of the media, telecommunications, and tower sectors.

Media Sector

  • Freeing up 700MHz band (so-called ‘refarming’ process) with subsequent upgrade of technology (DVB-T2) and standards (HEVC) for digital terrestrial broadcasting networks.
  • Increased broadcasting of OTT platforms.
  • Technological evolution in media production chain (4K video, IP…)
Opportunities for Rai Way
  • Remunerated investments for network upgrades for client RAI.
  • Extension of DAB radio network.
  • Introduction of content distribution services on broadband platforms.

Telecommunications Sector

  • Roll-out of fixed (IP) and mobile (5G) broadband networks.
  • Growing MNOs focus on cost optimization.
  • Development of IoT service ecosystems, including those with stringent latency requirements and local computational capacity.
Opportunities for Rai Way
  • Support the roll-out of wireless networks in areas of digital divide.
  • Enable new services through the evolution of infrastructure (e.g. Edge DataCentre, Fibre Backhauling)

Tower Sector

  • Progressive spin-off of captive infrastructure.
  • Consolidation of infrastructure.
  • Evolution of the role of TowerCos via an expansion into neighbouring businesses.
Opportunities for Rai Way
  • Industrial synergy.
  • Expansion into neighbouring infrastructure.

Sustainability of Digital Terrestrial Television

In Italy, digital terrestrial continues to show strong resilience, confirmed by a stable audience (about 10 million viewers throughout the day) and by an 85% share of TV broadcasters' advertising collection.

This performance, even in a context of growing diffusion of broadband platforms, is due both to historical reasons - linked to the relevance of Free TV compared to Pay TV - and to technical reasons.

This performance, considered also in terms of the growth of broadcasting on broadband platforms, is motivated both by history (linked to the introduction of free television vs. paid television) and by technology.

Since the 80s, and the diffusion of commercial TV, Italy has established itself as a primarily free-to-air market. Broadcasting – first analogue and then digital – is the platform of reference for the distribution of free content, acquiring also a strong social value. Cable TV has never been developed, whilst satellite is used primarily for paid TV and, where necessary, for the integration of DTT coverage in unreached areas.

Today, more than 70% of Italian families access television content using DTT as their primary platform.
This has made digital terrestrial television less vulnerable to other platforms, including broadband, which incurs a cost (either for accessing the platform or for the availability of broadband connection).

Even within the free-to-air market, the increase in video consumption is driven by its viewing modes – both on-demand and mobile – which are not based upon digital terrestrial broadcasting technology.
Considering consumer preference, however, for TV over other devices, as well as the distinct polarisation between modes of consumption and content type (on-demand for non-live and deferrable content, such as films and series, and liner for live and non-deferrable content aimed at a large audience, such as news, sport, and entertainment), the market is predicted to allow both platforms to co-exist.
In fact, when it comes to linear distribution – in particular, the content offered by ‘traditional’ broadcasters (characterised by a large portion of live events throughout the day) – broadcasting continues to be an efficient solution for both cost and usage capacity.

This mix of platforms will allow users to benefit from:

  • Broadcasting's wide coverage and audience
  • the flexibility and personalisation of broadband.

This perspective of complementarity is confirmed by the analyses of trends carried out in recent studies, which highlight:

  • the great success of digital terrestrial television during the pandemic (+10% audience) in its social role as ‘traditional’ TV;
  • the fact that around 90% of users on OTT platforms continue to watch content on ‘traditional’ TV.

Growth Drivers and Initiatives

Core business

To reinforce Core Business through the introduction of new technologies and platforms, offering new services, and the evolution of the operational model in terms of digital transformation:

  • taking opportunities offered by traditional broadcasting platforms in terms of technological evolution and the extension of network coverage;
  • extending content distribution and contribution services for OTT/IP platforms, improving our long-term position in the media/broadcasting value chain;
  • reinforcing the value proposition of tower business offers, through the increase of gamma services offered (e.g. fibre backhauling, Edge Data Centres, network quality control) and of our customer base;
  • introducing innovative elements in the management of assets and processes, in line with the digital and flexible transformation of the company, as well as enabling further improvement in operational efficiency on costs and maintenance investments.

Focus upon Refarming

Refarming process is crucial to Rai Way’s Industrial Plan, and has been subjected to a specific agreement signed by RAI in December 2019. At the same time, RAI also renewed its Service Contract between the two companies, restructuring the terms and conditions.

The freeing up 700MHz band by 30 June 2022 and the subsequent upgrade of the technology (DVB-T2) and standards (HEVC), as well as the extension of its coverage, require significant investments of roughly €150 million. Its remuneration will generate, according to the signed agreement, additional annual revenue of €15.8 million from 1 July 2021, in the new configuration of post-refarming networks, with 3 multiplexes assigned to RAI.

Expansion of Managed Infrastructure

To pursue a strategy which expands managed assets, including through external lines, which respond primarily to the requirements of diversification, dimensional scale, and the achievement of operational and financial synergy.
The possible directions of expansion, in Rai Way’s current sector or in adjacent sectors, will allow the Company to maintain a predominant infrastructural matrix consistent with its know-how. It will also allow for a reinforcement of growth profiles through industrial synergy and/or greater exposure to strongly developed markets.

Optionality and Innovation

Addressing optionality for innovative uses of existing infrastructure, focusing on services and technologies which are still early-stage, but with interesting potential prospects and which fit the distinctive characteristics of our assets.

Objectives and Targets

  1. With possibility to convert in a mix of dividends and buybacks, depending on the market.
  2. Within the limits of the distribution reserves. The details of the share buyback proposal are subject to market conditions
  3. Net Debt including the impact of IFRS-16

2023 Objectives

The Industrial Plan outlines, on an organic basis, the following economic and financial objectives for 2023:

Mln Eur; % 2019 Target 2023 CAGR 2019-23
Revenues 221,4 247 2,8%
Adjusted EBITDA 131,2 154 4,1%
Adjusted EBITDA margin % ~59% -62%  
Net income 63,4 73 3,7%
Maintenance Capex/Revenues ~8% ~6%  
2019-23 Cumulated Development Investments   220  
Normalized FCFE(2) 77,8 98 5,9%

  1. Processed based upon hypothesis of a CPI equal to 0.1% in 2020, 0.8% in 2021, and 1.1% in 2022 and 2023
  2. Normalized FCFE = Adjusted EBITDA - Net Expenses - Income Statement Tax - Recurring Maintenance Investments. All data has been adjusted in order to deduct rental costs impacted by the new accounting standard IFRS-16, to reflect effective cash generation.

Sustainability and Innovation

The company strategy's considers Rai Way’s 4 fundamental pillars of sustainability – Environment, Social, Governance, and Innovation – as well as the recommendations of the main ESG indices and national and international best practices.

For each pillar, the Sustainability Plan 2023 outlines the Company’s commitment through 6 strategic guidelines, 14 quantitative targets, and more than 50 operational initiatives which contribute to the achievement of the United Nations’ Sustainable Development Goals (SDGs).

With a view to full disclosure and transparency, Rai Way’s ESG performance is constantly monitored using the annual Non-Financial Declaration, as well as our engagement with the main ESG-rated companies.

Rai Way has always considered innovation, research, and digital transformation strategic levers to enhance know-how and technological assets and create value for the stakeholders in a fully-sustainable environment.

For these reasons, the Company has adopted an Open Innovation approach, based upon a dialogue with our internal resources on researching synergy with the external ecosystems of universities, start-ups, research bodies, large consultancy firms, and suppliers.
We are fully aware of the role innovation plays in sustainable development; that’s why, at Rai Way, we are committed to the efficient use of natural resources in the renewal process of various technological assets, through the evaluation of energy-efficient systems, and to developing evolutionary infrastructures for the improvement of the standard of living of the community.