2nd UPDATE:Tel Italia 1st Half Net Profit Falls 14%, Confirms 09 View
August 06 2009 - 1:44PM
Dow Jones News
Telecom Italia SpA (TI) Thursday said its first-half net profit
fell almost 14% due to higher tax payments, but confirmed its
profitability and cash-flow targets for the full year as
cost-cutting started to take effect.
Italy's largest telecom operator, which is focused on reducing
debt and slashing costs, posted a net profit of EUR964 million,
down from EUR1.12 billion a year earlier as it paid EUR484 million
more in taxes. The results beat analysts' expectations for net
profit of EUR945 million.
Revenue fell 5.8% to EUR13.95 billion from EUR14.8 billion a
year earlier, as a slowdown in domestic sales was only partially
offset by a better performance at Brazilian mobile-phone company
TIM Participacoes SA (TSU).
The Brazilian unit of Telecom Italia posted a narrower net loss
in the second quarter as restructuring measures improved its
operating performance. Mobile revenue posted a 7.1% drop in the
first half to EUR4.3 billion, confirming the fall in handset sales
and value-added services, while fixed-line sales showed an
improving trend.
Telecom Italia Chief Executive Franco Bernabe told analysts
Thursday that the changes in the mobile division - which is
shifting focus to higher-value customers - will start paying off in
early 2010.
First-half earnings before interest, taxes, depreciation and
amortization, or Ebitda, rose 3.1% to EUR5.67 billion, and Ebitda
margin improved by 1.5 percentage points over a year ago, Telecom
Italia said.
Still, shares fell as investors took profits following their
recent rally.
Telecom Italia shares closed down 4.6% at EUR1.06 in an overall
higher Italian market. The share has lost around 7% in value over
the last year.
"It looks like a good set of results and I particularly like the
improvement in Ebitda margins," said GestiRe asset manager
Gianpaolo Rivano. "I'd say there's nothing to worry about and some
profit-taking was expected," he added. Analysts at Societe
Generale, which rates Telecom Italia at hold, noted that even
though mobile revenue continued to shrink relatively fast, "the
stabilization in domestic wireline may become a centre piece of the
equity story."
Telecom Italia said Thursday its closely watched net debt stood
at EUR35.2 billion at the end of June, up from EUR34.5 billion at
the end of March.
As part of its 2009-11 business plan, Italy's largest telecom
operator pledged to reduce its debt to Ebitda ratio to 2.9 times by
the end of 2009 and to 2.3 times by the end of 2011, from about
2.99 times at the end of 2008.
Meanwhile, Telecom Italia kept its outlook for full-year 2009
Ebitda, adjusted for mergers and acquisitions, exceptional items
and currency movements, of between EUR9.9 billion and EUR10 billion
in Italy, and at about 3.6 billion reais ($2 billion) in
Brazil.
Earlier Thursday, European peer Deutsche Telekom AG (DT) also
confirmed its full-year targets, following the pattern set by
rivals Telefonica SA (TEF), BT Group PLC (BT) and France Telecom
(FTE).
Telecom Italia is the last major European operator to report in
the current period.
Many of Europe's telecom companies have slimmed down costs in a
fierce fight for dominance in the competitive European mobile and
broadband market. The cost cuts are also designed to preserve
margins as national and European regulators force down the cost to
consumers of voice calls, text messaging and data.
Company Web site: www.telecomitalia.com
-By Giada Zampano, Dow Jones Newswires; +39 06 69766925;
giada.zampano@dowjones.com
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