Renato Soru

Renato Soru: The Sardinian Who Gave Away the Internet

In October 1999 an internet company headquartered in Cagliari — on an island most Italians thought of as a holiday destination — went public on the Milan exchange. The offering was oversubscribed roughly forty times. It valued Tiscali at about 14 billion euros, which for a brief and delirious period made it the most valuable company in Italy, worth more than Fiat. Its founder still owned two-thirds of it, which made him the richest man in the country. Eighteen months earlier he had sold his house to fund the business that preceded it.

A Grocer's Son from Sanluri

Renato Soru was born on 6 August 1957 in Sanluri, in southern Sardinia. His mother ran a grocery store; his father worked as a school administrator. He left the island for Milan and read economics at Bocconi, Italy's most demanding business university, graduating in 1980.

His first job was as a bond trader at a merchant bank, and it was there — in front of a Bloomberg terminal, watching data move across a network — that he first understood what the internet might eventually be. It was an unusually early conversion. He did not act on it immediately; instead he moved into real estate, developing shopping malls across Europe and particularly in the Czech Republic, which put capital in his pocket and taught him how to build things in unfamiliar markets.

Prague, and Selling the House

In 1995 Soru returned to Sardinia and met Nicola Grauso, who was running Voice Online, one of Italy's earliest internet service providers. Soru took a franchise to establish Voice Online in the Czech Republic, funding it with roughly $200,000 of his own money. It worked spectacularly: the Czech operation eventually took about 70 percent of its market, and in 1998 he sold it to Deutsche Bank for $10 million.

Returning to Italy, he found that Telecom Italia had swallowed the domestic Voice Online business. So he started again. In 1997, in Cagliari, he founded Telefonica della Sardegna — selling his house to capitalise it. The company secured a licence to lease telephone lines from Telecom Italia, then expanded nationally by launching Italy's first telephone debit cards, capturing close to 30 percent of that new market.

The Model

The decisive insight arrived from Britain. Watching Freeserve succeed in the UK, Soru saw that internet access did not have to be sold to consumers at all. In March 1999 he launched Tiscali on an inverted premise: subscription would be free, and the revenue would come from the phone company. He negotiated an arrangement under which Telecom Italia handed him 50 percent of subscribers' telephone charges in exchange for the free service.

It was an immediate success, and its effect on Italy was structural. Internet adoption rates jumped, and competitors — including Telecom Italia itself — were forced to abandon paid subscriptions and copy him. Soru had used the incumbent monopolist's own infrastructure and billing system as his revenue engine, and the incumbent had agreed to it.

Then came the October 1999 flotation, the fortyfold oversubscription, and the 14-billion-euro valuation. By September 2001 Forbes put Soru's personal net worth above $4 billion.

Buying Europe, and the Reckoning

What followed was one of the most aggressive acquisition sprees of the dot-com era. Through 2000 Tiscali absorbed DataComm in Switzerland, A Telecom in France, Nikoma Beteiligungs in Germany, Link Line and Interweb in Belgium, CD Telekomunikace in the Czech Republic. In December 2000 it bought the Dutch operator World Online for 5.9 billion euros, vaulting Tiscali into European leadership with more than 3.5 million subscribers in fifteen countries. In 2001 it added France's Freesurf, the country's second-largest ISP, for $615 million, and Britain's Springboard Internet Services, including LineOne, for 100 million euros.

By the end of 2001 Tiscali claimed over 16 million registered and 7.3 million active subscribers across thirteen European countries — third in Italy, second in France and the Benelux, fourth in Germany and the UK — on annual sales of 635 million euros, of which 64 percent still came from access-revenue kickbacks.

The bill arrived in early 2002. Tiscali recorded losses exceeding 1.6 billion euros, including a billion in exceptional charges written off against those acquisitions. Soru cut spending and simplified the organisation, and Tiscali claimed to be the first European ISP to turn a profit by the first quarter of 2002 — a survivor, but of a very different size than the 1999 valuation had promised.

Politics

In 2004 Soru turned to public life, elected President of Sardinia at the head of a centre-left coalition. He took office on 26 June 2004 and pursued a programme of regional economic revival built around attracting external investment to the island. In May 2008 he bought *l'Unità*, the historic left-wing newspaper. He resigned the presidency on 28 November 2008, and in the February 2009 election that followed he was defeated by the centre-right candidate Ugo Cappellacci, formally leaving office on 27 February 2009.

A long legal shadow followed. On 5 May 2016 he was sentenced to three years in prison for tax evasion of roughly 2.6 million euros, in a case concerning a loan from Andalas Ltd to Tiscali. The Italian Court of Appeal reversed the sentence on 8 May 2017, clearing him on three of the five counts.

Why Renato Is Called a Genius

Soru's distinguishing faculty is business-model inversion: the ability to look at an industry's revenue assumption and flip it. Everybody in 1999 assumed an internet provider sold access to consumers. Soru saw that the money was already flowing — through the telephone network, metered by the minute — and that the provider's job was to capture a share of a payment the customer was making anyway. Persuading Telecom Italia to hand over half of it was the real act of imagination, because it required the monopolist to fund its own disruption. He had form: the Czech franchise and the debit cards were both cases of spotting an unclaimed margin and moving fast. He also did it from Cagliari, deliberately building a European-scale company on an island periphery rather than in Milan — a genuine refusal of economic gravity.

The counter-case is substantial and Soru would struggle to dispute it. The free-access model was not his invention; it was Freeserve's, and Soru's contribution was rapid, well-negotiated adaptation rather than origination. The 14-billion-euro valuation was a bubble artefact that reflected the market's mood far more than the company's economics, and the fortune it conferred was paper. The acquisition spree that followed destroyed well over a billion euros of value and looks, in retrospect, like a man mistaking a bull market for his own judgement. His political career ended in resignation and electoral defeat, and his tax case, though largely reversed on appeal, was not a clean acquittal. The fair verdict is not visionary but something more specific: an exceptionally quick and daring reader of business models, whose best decision was made in 1999 and whose subsequent decade tested how far a single brilliant insight can be stretched.

Legacy

Tiscali survived the crash that killed most of its contemporaries — by early 2002 it was claiming to be the first European ISP back in profit. His deeper mark on Italy is the one hardest to price: for a few years around the turn of the millennium, a grocer's son from Sanluri made the most valuable company in the country a Sardinian one, and forced the national telecoms monopoly to change how an entire population got online.

Achievements

• Holdings: Tessellis
• Educated at Bocconi University