Intred S.p.A. – A Regional Fibre-Optic Champion
Italy’s fibre-optic expansion offers significant untapped opportunities. Fibre optics has become the backbone of digital innovation – and it is not only the major telecommunications groups driving this development, but also specialised regional providers. One of them is the highly profitable INTRED S.p.A.
MONTHLY
This article does not constitute a recommendation to buy securities or investment advice.
Figure 1: Illustration of Intred's services; AI-assisted
Paraphrasing Warren Buffett, we believe that the best investments are based on a simple thesis: the more obvious the advantages of an investment, the greater the likelihood of a positive outcome.
In our view, Italy's Intred S.p.A. is one such case.
We have:
a) Growing demand for fibre-optic connections,
b) Profitability temporarily diluted by ongoing investments, and
c) A proprietary fibre-optic network worth more than the company's current market capitalisation!
For us, this represents a compelling investment thesis combining growth (increasing demand for fibre-optic connectivity) with tangible downside protection (the replacement value of the company's own network).
Below, we would like to explain our investment thesis in greater detail.
Figure 2: Daniele Peli, CEO of Intred S.p.A.; source: www.bresciaoggi.it
The History of Intred: From a Simple Reseller to a Leader in Digital Infrastructure
Intred's origins date back to 1996, when its current CEO, Daniele Peli, founded the company together with two partners as a reseller of internet and telephone services in Brescia (Lombardy, Italy). Since then, the company has reached several important milestones:
2010: Development of its own fibre-optic network in the Brescia region, followed by steady expansion.
2018: IPO! Raising EUR 11 million to finance further network expansion and strong growth throughout Lombardy.
2021/2022: Winning the government tender to connect all schools in Lombardy to fibre-optic broadband.
From 2022: Expansion of proprietary data centres to offer customers cloud storage and cybersecurity solutions – a rapidly growing business segment!
Daniele Peli: A Visionary with Business Acumen
Trained as a technical engineer, Daniele Peli recognised the potential of fibre-optic infrastructure early on, driven by the ever-increasing demand for data transmission capacity. When he decided to build his own fibre-optic network in 2010, by which time he had become the majority shareholder, he deliberately focused on Fiber-to-the-Home (FTTH) connections for his customers.
As we will see, FTTH is the critical link that enables users to access the full bandwidth potential of their internet connection.
Figure 3: Share of fibre-optic connections among SMEs in Lombardy in 2023/24; source: www.agcom.it
Focus on a Profitable Niche: Smaller Municipalities with Limited Competition
With a fibre-optic network currently spanning more than 14,200 km, Intred has a presence in every municipality across Lombardy.
Through this extensive network expansion, Peli has laid the foundation for further growth. Particularly in smaller municipalities, it is often economically unattractive for a competitor to invest in building a separate network when an established provider – in most cases Intred – is already present.
We believe Peli's latest strategic move, transitioning from a pure data transmission provider to a supplier of complementary value-added services such as cloud storage and cybersecurity, will create additional value on top of the growing number of fibre-optic connections.
Through DM Holding, Peli owns more than 60% of the company's share capital. Since the IPO in 2018, DM Holding has sold a block of shares only once (approximately 4% in 2021), at a price of EUR 17.25 per share – more than 80% above the current share price.
A Closer Look: FTTH and Its Advantages
Fibre optics is the only transmission medium capable of providing virtually unlimited bandwidth – in other words, data transmission speeds.
Historically, DSL and coaxial cables, which rely on copper conductors, have been used for internet connections. Under optimal conditions, these technologies can achieve download speeds of up to 1,000 Mbit/s. However, because these connections are asymmetrical, upload speeds are significantly lower.
Fibre optics, by contrast, allows data to be uploaded just as quickly as it can be downloaded – an increasingly important advantage in a world of growing cloud-based applications.
However, there are several important distinctions in the structure of fibre-optic connections:
FTTC – FTTB – FTTH
These abbreviations describe how far the fibre-optic connection extends:
FTTC (Fiber-to-the-Curb): Fibre optics extend to the telecommunications provider's street cabinet, with copper cables connecting the cabinet to the building (maximum upload speed of 100 Mbit/s).
FTTB (Fiber-to-the-Building): Fibre optics extend to the building, with copper cables used for internal connections (maximum upload speed of 1 Gbit/s).
FTTH (Fiber-to-the-Home): Fibre optics extend directly into and throughout the building (currently supporting upload and download speeds of 10 Gbit/s and more).
The only true symmetrical ultra-broadband connection
Intred was one of the first Italian providers to specialise in installing FTTH connections – once considered a niche market – and has achieved considerable, sustainable success with this strategy!
Growth Drivers
Over the coming years, Intred's strategic positioning should allow the company to grow across its existing business segments:
Fibre Optics and Value-Added Services for Business Customers
In Lombardy, approximately 61% of companies have one or more fibre-optic connections.
Lombardy is the driving force of the Italian economy, currently experiencing significant growth in the number of businesses operating in business services and tourism (+4–5% annually). These businesses have an increasing need for high-performance internet connections.
Figure 4: FTTH fibre-optic connections in Italy, 2024; source: www.ftthcouncil.eu
Of particular importance to us is the growth potential of value-added services for business customers.
Intred plans to allocate approximately 20% of its capital expenditure through 2027 to expanding data centres and cybersecurity solutions.
We see this as a clear strategic move to strengthen its business customer offering – transitioning from a pure data transmission provider into a comprehensive supplier of digital infrastructure services!
Fibre Optics for Private Households
While Italy's fibre-optic network is expanding rapidly, much of the development is concentrated in densely populated metropolitan areas such as Milan, Rome and Turin.
With a network already reaching every municipality in Lombardy, Intred is well positioned to benefit from steady single-digit growth over the coming years.
Italy currently ranks fifth from the bottom in a European comparison of fibre-optic penetration (including Switzerland, Ukraine and Turkey), with FTTH penetration of just 17.7%, compared with a European average of 39.6%.
Figure 5: Revenue and operating cash flow, Intred 2015–2024; source: www.tikr.com
Financial Performance and Valuation
Strong Cash Flows Enable Sustainable Growth
Thanks to its profitable niche positioning, Intred has been able to grow profitably over the long term.
What we particularly like is the combination of recurring revenues (currently accounting for 92% of total revenue), supported by long-term contracts, and growing demand.
The customer churn rate – the proportion of customers leaving the company – has consistently remained below 5%.
Internet contracts are similar to mobile phone contracts: once customers have chosen a provider, they rarely switch! At the same time, the provider's operating costs decline once a contract has been signed and the network connection established.
The result is a profitable, cash-generative business that produces approximately 40 cents of operating cash flow for every EUR 1 of revenue.
Furthermore, fibre-optic infrastructure is long-lasting and requires relatively little maintenance. Approximately 80–90% of capital expenditure is growth-related, as installed fibre-optic cables generally only need replacing every 30 years.
Recurring revenues, marginal operating costs and low maintenance capital expenditure enable strong, internally financed growth.
Intred has invested approximately EUR 180 million in capital expenditure (from 2020 through the planned investments for 2027), while financial liabilities amount to less than EUR 50 million – of which more than EUR 10 million relates to goodwill from acquisitions.
Table 1: Valuation scenarios; own illustration
Downside Protection – 14,200 km of Fibre Optics
An essential aspect of downside protection is the tangible asset backing a company can offer.
We approach this from the perspective of a buyer acquiring the entire company, rather than merely purchasing a small number of shares!
Intred owns an existing fibre-optic network spanning approximately 14,200 km.
According to information provided by competitors (see, for example, presentations by Planetel S.p.A.), the average cost of installing fibre-optic cables is approximately EUR 13 per metre.
For Intred, this implies a potential replacement value of approximately EUR 185 million (14,200 km × EUR 13/m).
We believe the network outside Milan is particularly valuable and therefore adjust this figure by the share of revenue generated in the metropolitan area (12%).
The result is an effective replacement value of approximately EUR 162 million.
The current stock market value of all Intred shares (as of 3 February 2026) is EUR 156 million
In our view, this provides a compelling indication of the underlying value of our investment, which currently even exceeds the company's market capitalisation.
Valuation
Understanding the structure of Intred's cash flows is particularly important.
Based on the company's financial statements, free cash flow (operating cash flow less capital expenditure) is currently very limited. This is because Intred continuously invests in expanding its fibre-optic network, thereby strengthening its market position and increasing revenue.
As discussed earlier, fibre-optic infrastructure is a relatively low-maintenance business. We have also established that customer churn is very low.
This means that if Intred were to shift its focus towards dividends or share buybacks, it could convert the majority of its operating cash flow – approximately 85%, by our estimates – into free cash flow.
Even at current levels, this would imply a yield of more than 10% based on the company's present market valuation.
Under our conservative Scenario 1, we assume continued revenue growth of approximately 5% annually over the next five years.
While the company itself expects to generate revenue of up to EUR 73 million by the end of 2027, we do not expect this level to be reached until 2030.
We also anticipate increasing competition and pricing pressure over the coming years, which could reduce the operating cash flow margin from 40% to 35% of revenue.
Figure 6: Intred S.p.A. share price performance since its IPO in July 2018; source: www.tikr.com
If the company's assumptions prove accurate, we believe revenue could reach approximately EUR 84.5 million by 2030 (based on revenue of EUR 73 million in 2027, growing by 5% annually through 2030).
As a benchmark for our exit multiple, we use the STOXX Europe 600 Telecommunications Index, where we observe average price-to-earnings (P/E) ratios of 10–14x.
Most companies in this index are diversified groups with a focus on mobile communications, television and integrated IT solutions for customers. Growth in these businesses has been stagnant or declining for years.
Our approach combines conservative growth estimates with a discount in the exit multiple, providing a margin of safety for analytical errors and unforeseen developments.
In this case, we consider a P/E multiple of 12.5x appropriate within the observed range of 10–14x.
Before dividends, this results in a projected annual return of 12.0–15.3% based on the current equity valuation of approximately EUR 150 million.
Conclusion
Intred S.p.A. is a holding in our OHP Unternehmerfonds.
We see Intred as a provider of digital infrastructure that has become an essential backbone of the ongoing digitalisation of the workplace and the development of our society.
At its helm is a visionary engineer who has combined technical expertise with entrepreneurial judgement to build a leading regional business.
The current share price offers an attractive projected return, which could be further enhanced by additional shareholder-friendly measures such as higher dividends or share buybacks.
Ott, Hagen & Partner AG
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