UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF JUNE 2015
TELECOM ITALIA S.p.A.
(Translation of registrant's name into English)
Via Gaetano Negri 1
20123 Milan, Italy
(Address of principal executive offices)
Indicate by check mark whether the registrant files
or will file annual reports under cover of Form 20-F or Form 40-F:
FORM 20-F [X] FORM 40-F [ ]
Indicate by check mark if the registrant
is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant
is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934.
YES [ ] NO [X]
If "Yes" is marked, indicate below the file number assigned
to the registrant in connection with Rule 12g3-2(b): 82- _______
![](x15062318430500.gif)
This file cancels and replaces the previous submission, if any, because of a technical problem.
INTERIM REPORT AT MARCH 31, 2014
Contents
Interim Management Report at March 31, 2014_ 3
The Telecom Italia
Group_ 3
Highlights – First
Three Months of 2014_ 5
Consolidated
Operating Performance_ 7
Financial and
Operating Highlights – The Business Units of the Telecom Italia Group_ 14
Discontinued
operations/Non-current assets held for sale_ 27
Consolidated
Financial Position and Cash Flows Performance_ 31
Consolidated
Financial Statements – Telecom Italia Group_ 39
Events Subsequent to
March 31, 2014_ 51
Business Outlook for
the Year 2014_ 51
Main
risks and uncertainties_ 51
Corporate Boards at
March 31, 2014_ 52
Macro-Organization
Chart at March 31, 2014_ 55
Information for
Investors_ 57
Significant Non
Recurring Events and Transactions_ 55
Positions or
transactions resulting from atypical and/or unusual operations_ 55
Alternative
Performance Measures_ 56
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 57
Contents__________________________________________________________________________ 58
Consolidated Statements of Financial Position__________________________________________ 59
Separate Consolidated Income Statements______________________________________________ 60
Consolidated Statements of Comprehensive Income______________________________________ 61
Consolidated Statements of Changes in Equity__________________________________________ 62
Consolidated Statements of Cash Flows________________________________________________ 63
Notes to the Consolidated Financial
Statements_________________________________________ 64
Auditors’ Report on the Review of the Interim
Condensed Consolidated Financial Statements__ 111
Declaration by the Manager Responsible for
Preparing the Corporate Financial Reports________ 112
This document has been translated into
English solely for the convenience of the readers. In the event of discrepancy,
the Italian language version prevails.
Interim Management Report at March 31, 2014
The Telecom Italia Group
The Business Units
DOMESTIC
|
The Domestic Business Unit operates as
the consolidated market leader in the sphere of voice and data services on
fixed and mobile networks for final retail customers and other wholesale
operators.
In the international field, the Business
Unit develops fiber optic networks for wholesale customers (in Europe, in the
Mediterranean and in South America).
Olivetti operates in the area of office products and services for
Information Technology. It carries out Solution Provider activities to
automate processes and business activities for small and medium-size
enterprises, large corporations and vertical markets.
|
CORE
DOMESTIC
• Consumer
• Business
• National Wholesale
• Other (Support Structures)
|
INTERNATIONAL
WHOLESALE
Telecom Italia Sparkle group
• Telecom Italia
Sparkle S.p.A.
• Lan Med Nautilus group
OLIVETTI
Olivetti group
• Olivetti S.p.A.
|
Brazil
|
The Brazil Business Unit (Tim Brasil group) offers services using UMTS, GSM and LTE technologies. Moreover,
with the acquisitions and subsequent integrations into the group of Intelig
Telecomunicações, Tim Fiber RJ and Tim Fiber SP, the services portfolio has
been extended by offering fiber optic data transmission using full IP
technology such as DWDM and MPLS and by offering residential broadband
services.
|
Tim Brasil Serviços e Participações S.A.
• Tim Participações S.A.
–
Intelig Telecomunicações Ltda
–
Tim Celular S.A.
|
MEDIA
|
Media operates in the management of
analog and digital broadcasting networks and accessory services of television
broadcasting platforms.
|
Telecom Italia Media S.p.A.
• TI
Media Broadcasting S.r.l.
|
Interim Management Report at March 31,
2014
|
The Telecom Italia Group
|
3
|
Board of Directors
Chairman
|
Giuseppe Recchi
|
Chief Executive Officer
|
Marco Patuano
|
Directors
|
Tarak Ben Ammar
Davide Benello
(independent)
Lucia Calvosa
(independent)
Flavio Cattaneo
(independent)
Laura Cioli
(independent)
Francesca Cornelli
(independent)
Jean Paul Fitoussi
Giorgina Gallo
(independent)
Denise
Kingsmill (independent)
Luca
Marzotto (independent)
Giorgio Valerio
(independent)
|
Secretary to the Board
|
Antonino
Cusimano
|
Board of Statutory Auditors
Chairman
|
Enrico Maria
Bignami
|
Acting
Auditors
|
Roberto Capone
|
|
Gianluca
Ponzellini
|
|
Salvatore
Spiniello
|
|
Ferdinando
Superti Furga
|
Alternate
Auditors
|
Ugo Rock
|
|
Vittorio Mariani
|
|
Franco Patti
|
|
Fabrizio
Riccardo Di Giusto
|
Interim Management Report at March 31,
2014
|
Board of Directors and Board of Statutory
Auditors
of Telecom Italia S.p.A.
|
4
|
Highlights – First Three Months of 2014
The first quarter of 2014 was again
affected by recessionary pressures in the domestic market and the slowdown of
the growth in the economies of Latin American countries.
The telecommunications market continues to
see an increasing trend in innovative services, which is only marginally
offsetting the downturn in prices and revenues from traditional services.
Despite the confirmation of the signs of cooling and improvement in competition
(particularly in the domestic Mobile business), traditional services continue
to report a sharp decline in ARPU, not only in the Mobile business but also in
the Fixed-line business. This was partly due to the strategy of repositioning
customers towards bundle and/or fixed-line and mobile convergent offers which –
against a short-term reduction in profitability – will ensure the stability of
the market share in the short term and a gradual stabilization of expenditure
and revenues in the medium/long-term. Results also continued to be affected by
the adverse impact of several regulatory trends and factors, in particular
rates for wholesale services.
In Brazil economic growth was modest and
the exchange rate depreciated by almost 20% compared to the first quarter of
2013. In a scenario of greater competition pressure, the mobile customers
market experienced a slowdown compared to the same period of the previous year.
However this did not affect the growth of the Brazilian investee.
Please note that, as regards Argentina, on
November 13, 2013 the Telecom Italia Group accepted the purchase offer, made by
the Fintech group, for the entire controlling interest held in the Sofora -
Telecom Argentina group (Argentina Business Unit). As a result, with effect
from the financial statements at December 31, 2013, the Business Unit has been
classified under Discontinued operations/Non-current assets held for sale.
Obtaining the necessary local authorizations is the condition precedent for the
completion of the sale.
Specifically, for the first quarter of
2014:
• Consolidated
revenues amounted to 5.2 billion euros, down by 11.9% on the first quarter of
2013 (-6.2% in organic terms), while EBITDA fell to 2.2 billion euros, down
8.4% (-5.7% in organic terms).
• The
organic EBITDA margin stood at 42.4%, 0.2 percentage points higher than in the
first quarter of 2013.
• Operating
profit (EBIT) amounted to 1.2 billion euros, increasing by 1.1% compared to the
first quarter of 2013 (+2.7% in organic terms). The organic EBIT Margin stood
at 22.5%, 2.0 percentage points higher than in the first quarter of 2013.
• Profit
for the period attributable to owners of the Parent totaled approximately 0.2
billion euros (versus 0.4 billion euros in the first quarter of 2013).
• Adjusted
Net Financial Debt consequently came to 27.5 billion euros at March 31, 2014,
an increase of 0.7 billion euros compared to the end of 2013, but down year-on-year
by over 1.2 billion euros compared to March 31, 2013.
Interim Management Report at March 31,
2014
|
Review of Operating and Financial
Performance - Telecom Italia Group
|
5
|
Interim Management Report at March 31,
2014
|
Review of Operating and Financial
Performance - Telecom Italia Group
|
6
|
Interim Management Report at March 31, 2014 |
Review of Operating and Financial Performance - Telecom Italia Group |
7 |
Interim Management Report at March 31,
2014
|
Review of Operating and Financial
Performance - Telecom Italia Group
|
8
|
Interim Management Report at March 31,
2014
|
Review of Operating and Financial
Performance - Telecom Italia Group
|
9
|
Interim Management Report at March 31,
2014
|
Review of Operating and Financial
Performance - Telecom Italia Group
|
10
|
Interim Management Report at March 31,
2014
|
Review of Operating and Financial
Performance - Telecom Italia Group
|
11
|
Interim Management Report at March 31,
2014
|
Review of Operating and Financial
Performance - Telecom Italia Group
|
12
|
Profit (loss) for the period
The details are as follows:
(millions of euros)
|
1st Quarter
|
1st Quarter
|
|
2014
|
2013
|
|
|
|
Profit (loss) for
the period
|
367
|
448
|
Attributable to:
|
|
|
Owners of the Parent:
|
|
|
Profit (loss) from continuing operations
|
196
|
342
|
Profit (loss) from Discontinued
operations/Non-current assets held for sale
|
26
|
22
|
Profit (loss) for
the period attributable to owners of the Parent
|
222
|
364
|
Non-controlling interests:
|
|
|
Profit (loss) from continuing operations
|
38
|
9
|
Profit (loss) from Discontinued
operations/Non-current assets held for sale
|
107
|
75
|
Profit (loss) for
the period attributable to non-controlling interests
|
145
|
84
|
Interim Management Report at March 31, 2014
|
Financial and Operating Highlights –
The Business Units of the Telecom Italia Group
Domestic
Business Unit
|
14
|
Interim Management Report at March 31, 2014
|
Financial and Operating Highlights –
The Business Units of the Telecom Italia Group
Domestic
Business Unit
|
15
|
Interim Management Report at March 31, 2014
|
Financial and Operating Highlights –
The Business Units of the Telecom Italia Group
Domestic
Business Unit
|
16
|
Interim Management Report
at March 31, 2014
|
Financial and Operating Highlights –
The Business Units of the Telecom Italia Group
Domestic
Business Unit
|
17
|
Interim Management Report
at March 31, 2014
|
Financial and Operating Highlights –
The Business Units of the Telecom Italia Group
Domestic
Business Unit
|
18
|
Interim Management Report at
March 31, 2014
|
Financial and Operating
Highlights –
The Business Units of the Telecom Italia Group
Domestic Business Unit
|
19
|
Interim Management Report at
March 31, 2014
|
Financial and Operating
Highlights –
The Business Units of the Telecom Italia Group
Domestic Business Unit
|
20
|
Interim Management Report at March 31,
2014
|
Information for Investors
|
57
|
Alternative
Performance Measures
In this Interim Report at March 31, 2014
of the Telecom Italia Group, in addition to the conventional financial
performance measures required by IFRS, a series of alternative performance
measures are presented for the purposes of providing a better understanding
of results from operations and the financial position. Such measures, which are
also presented in other periodical financial reports (annual and interim)
should, however, not be construed as a substitute for those required by IFRS.
The alternative performance measures
used are described below:
• EBITDA: this financial measure is used by Telecom Italia as the financial
target in internal presentations (business plans) and in external presentations
(to analysts and investors). It represents a useful unit of measurement for the
evaluation of the operating performance of the Group (as a whole and at the
Business Unit level), in addition to EBIT. These measures are
calculated as follows:
Profit
(loss) before tax from continuing operations
|
+
|
Finance expenses
|
-
|
Finance income
|
+/-
|
Other expenses (income) from
investments
|
+/-
|
Share of losses (profits) of associates
and joint ventures accounted for using the equity method
|
EBIT-
Operating profit (loss)
|
+/-
|
Impairment losses (reversals) on
non-current assets
|
+/-
|
Losses (gains) on disposals of
non-current assets
|
+
|
Depreciation and amortization
|
EBITDA
- Operating profit (loss) before depreciation and amortization, Capital gains
(losses) and Impairment reversals (losses) on non-current assets
|
• Organic change in Revenues, EBITDA and EBIT: these measures express changes
(amount and/or percentage) in revenues, EBITDA and EBIT, excluding, where
applicable, the effects of the change in the scope of consolidation and
exchange differences. In particular, starting
from this Interim Management Report, Telecom Italia has revised the method for
calculating the organic change in revenues, EBITDA and EBIT, no longer
including non-organic income/expenses in that calculation. As noted above,
organic changes now include only the effects of the change in the scope of consolidation and of exchange
differences. Figures for the periods under comparison have been
reclassified accordingly.
Telecom Italia believes that the
presentation of the organic change in revenues, EBITDA and EBIT allows for a
more complete and effective understanding of the operating performance of the
Group (as a whole and at the Business Unit level). This method of presenting
information is also used in presentations to analysts and investors. This Interim Management Report provides
a reconciliation between the “reported figure” and the "comparable”
figure.
• Net Financial Debt: Telecom Italia believes that Net
Financial Debt represents an accurate indicator of its ability to meet its
financial obligations. It is represented by Gross Financial Debt less Cash and
Cash Equivalents and other Financial Assets. The Interim Management Report includes a table showing the amounts taken from the
statement of financial position and used to calculate the Net Financial Debt of
the Group.
To better
represent the real performance of Net Financial Debt, in addition to the usual
indicator (renamed “Net financial debt carrying amount”), “Adjusted net
financial debt” is also shown, which excludes effects that are purely
accounting and non-monetary in nature deriving from the fair value measurement
of derivatives and related financial assets and liabilities.
Net financial debt is calculated as follows:
+
|
Non-current financial liabilities
|
+
|
Current financial liabilities
|
+
|
Financial liabilities directly
associated with Discontinued operations/Non-current assets held for sale
|
A)
|
Gross
financial debt
|
+
|
Non-current financial assets
|
+
|
Current financial assets
|
+
|
Financial assets relating to
Discontinued operations/Non-current assets held for sale
|
B)
|
Financial
assets
|
C=(A - B)
|
Net
financial debt carrying amount
|
D)
|
Reversal
of fair value measurement of derivatives and related financial
assets/liabilities
|
E=(C + D)
|
Adjusted
net financial debt
|
Consolidated Statements of Financial Position
(millions of euros) |
|
note |
3/31/2014 |
12/31/2013 |
|
|
|
|
|
Non-current assets |
|
|
|
|
Intangible assets |
|
|
|
|
Goodwill |
|
4) |
29,984 |
29,932 |
Other intangible assets |
|
5) |
6,180 |
6,280 |
|
|
|
36,164 |
36,212 |
Tangible assets |
|
6) |
|
|
Property, plant and equipment owned |
|
|
12,182 |
12,299 |
Assets held under finance leases |
|
|
887 |
920 |
|
|
|
13,069 |
13,219 |
Other non-current assets |
|
|
|
|
Investments in associates and joint ventures accounted for using the equity method |
|
|
35 |
65 |
Other investments |
|
|
46 |
42 |
Non-current financial assets |
|
|
1,340 |
1,256 |
Miscellaneous receivables and other non-current assets |
|
|
1,697 |
1,607 |
Deferred tax assets |
|
|
983 |
1,039 |
|
|
|
4,101 |
4,009 |
Total Non-current assets |
(a) |
|
53,334 |
53,440 |
Current assets |
|
|
|
|
Inventories |
|
|
392 |
365 |
Trade and miscellaneous receivables and other current assets |
|
|
5,921 |
5,389 |
Current income tax receivables |
|
|
36 |
123 |
Current financial assets |
|
|
|
|
Securities other than investments, financial receivables and other current financial assets |
|
|
1,646 |
1,631 |
Cash and cash equivalents |
|
|
3,945 |
5,744 |
|
|
|
5,591 |
7,375 |
Current assets sub-total |
|
|
11,940 |
13,252 |
Discontinued operations/Non-current assets held for sale |
|
7) |
|
|
of a financial nature |
|
|
508 |
657 |
of a non-financial nature |
|
|
2,500 |
2,871 |
|
|
|
3,008 |
3,528 |
Total Current assets |
(b) |
|
14,948 |
16,780 |
Total Assets |
(a+b) |
|
68,282 |
70,220 |
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Consolidated Statements of Financial Position |
58 |
(millions of euros)
|
|
note
|
3/31/2014
|
12/31/2013
|
|
|
|
|
|
Equity
|
|
8)
|
|
|
Share capital issued
|
|
|
10,693
|
10,693
|
less: treasury shares
|
|
|
(89)
|
(89)
|
Share capital
|
|
|
10,604
|
10,604
|
Paid-in capital
|
|
|
1,704
|
1,704
|
Other reserves and retained earnings
(accumulated losses), including profit (loss) for the period
|
|
|
5,035
|
4,753
|
Equity attributable
to owners of the Parent
|
|
|
17,343
|
17,061
|
Equity attributable to Non-controlling
interests
|
|
|
3,038
|
3,125
|
Total Equity
|
(c)
|
|
20,381
|
20,186
|
Non-current liabilities
|
|
|
|
|
Non-current financial liabilities
|
|
9)
|
31,040
|
31,084
|
Employee benefits
|
|
|
894
|
889
|
Deferred tax liabilities
|
|
|
281
|
234
|
Provisions
|
|
|
706
|
699
|
Miscellaneous payables and other
non-current liabilities
|
|
|
766
|
779
|
Total Non-current
liabilities
|
(d)
|
|
33,687
|
33,685
|
Current liabilities
|
|
|
|
|
Current financial liabilities
|
|
9)
|
5,182
|
6,119
|
Trade and miscellaneous payables and other
current liabilities
|
|
|
7,699
|
8,649
|
Current income tax payables
|
|
|
52
|
20
|
Current liabilities sub-total
|
|
|
12,933
|
14,788
|
Liabilities directly
associated with Discontinued operations/Non-current assets held for sale
|
|
7)
|
|
|
of a financial nature
|
|
|
27
|
27
|
of a non-financial nature
|
|
|
1,254
|
1,534
|
|
|
|
1,281
|
1,561
|
Total Current
Liabilities
|
(e)
|
|
14,214
|
16,349
|
Total Liabilities
|
(f=d+e)
|
|
47,901
|
50,034
|
Total Equity and
Liabilities
|
(c+f)
|
|
68,282
|
70,220
|
Telecom
Italia Group Condensed
Consolidated Financial Statements at March
31, 2014
|
Consolidated Statements of
Financial Position
|
59
|
Separate Consolidated Income Statements
|
|
1st Quarter
|
1st Quarter
|
(millions of euros)
|
|
2014
|
2013
|
|
|
|
|
Revenues
|
|
5,188
|
5,889
|
Other income
|
|
84
|
54
|
Total operating revenues and other income
|
|
5,272
|
5,943
|
Acquisition of goods and services
|
|
(2,179)
|
(2,557)
|
Employee benefits expenses
|
|
(775)
|
(845)
|
Other operating expenses
|
|
(267)
|
(327)
|
Change in inventories
|
|
23
|
50
|
Internally generated assets
|
|
126
|
138
|
Operating profit before depreciation and
amortization, capital gains (losses) and impairment reversals (losses) on
non-current assets (EBITDA)
|
|
2,200
|
2,402
|
Depreciation and amortization
|
|
(1,070)
|
(1,149)
|
Gains (losses) on disposals of non-current
assets
|
|
37
|
6
|
Impairment reversals (losses) on
non-current assets
|
|
−
|
(105)
|
Operating profit (loss) (EBIT)
|
|
1,167
|
1,154
|
Share of losses (profits) of associates
and joint ventures accounted for using the equity method
|
|
(5)
|
−
|
Other income (expenses) from investments
|
|
11
|
−
|
Finance income
|
|
366
|
732
|
Finance expenses
|
|
(1,051)
|
(1,244)
|
Profit (loss) before tax from continuing
operations
|
|
488
|
642
|
Income tax expense
|
|
(254)
|
(291)
|
Profit (loss) from continuing operations
|
|
234
|
351
|
Profit (loss) from Discontinued
operations/Non-current assets held for sale
|
|
133
|
97
|
Profit (loss) for the period
|
|
367
|
448
|
Attributable to:
|
|
|
|
Owners of the
Parent
|
|
222
|
364
|
Non-controlling
interests
|
|
145
|
84
|
(euro)
|
|
1st Quarter
|
1st Quarter
|
|
|
2014
|
2013
|
|
|
|
|
Earnings per share:
|
|
|
|
Basic and Diluted Earnings Per Share (EPS)
|
|
|
|
Ordinary Share
|
|
0.02
|
0.02
|
Savings Share
|
|
0.03
|
0.03
|
of which:
|
|
|
|
from Continuing operations
|
|
|
|
Ordinary Share
|
|
0.01
|
0.01
|
Savings Share
|
|
0.02
|
0.02
|
from Discontinued operations/Non-current
assets held for sale
|
|
|
|
Ordinary Share
|
|
0.01
|
0.01
|
Savings Share
|
|
0.01
|
0.01
|
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Separate
Consolidated Income Statements
|
60
|
Consolidated Statements of Comprehensive Income
(millions of euros)
|
|
1st Quarter
|
1st Quarter
|
|
|
2014
|
2013
|
|
|
|
|
Profit (loss) for the period
|
(a)
|
367
|
448
|
Other components
of the Consolidated Statements of Comprehensive Income:
|
|
|
|
Other components
that subsequently will not be reclassified in the
Separate
Consolidated Income Statements
|
|
|
|
Remeasurements of
employee defined benefit plans (IAS 19):
|
|
|
|
Actuarial gains (losses)
|
|
−
|
−
|
Net fiscal impact
|
|
−
|
−
|
|
(b)
|
−
|
−
|
Share of other
comprehensive income (loss) of associates and joint ventures accounted for
using the equity method:
|
|
|
|
Profit (loss)
|
|
−
|
−
|
Net fiscal impact
|
|
−
|
−
|
|
(c)
|
−
|
−
|
Total other components that subsequently
will not be reclassified in the separate consolidated income statements
|
(d=b+c)
|
−
|
−
|
Other components
that subsequently will be reclassified in the
Separate
Consolidated Income Statements
|
|
|
|
Available-for-sale
financial assets:
|
|
|
|
Profit (loss) from fair value adjustments
|
|
24
|
(10)
|
Loss (profit) transferred to the Separate
Consolidated Income Statement
|
|
(6)
|
(1)
|
Net fiscal impact
|
|
(3)
|
1
|
|
(e)
|
15
|
(10)
|
Hedging
instruments:
|
|
|
|
Profit (loss) from fair value adjustments
|
|
(26)
|
102
|
Loss (profit) transferred to the Separate
Consolidated Income Statement
|
|
2
|
(71)
|
Net fiscal impact
|
|
4
|
(8)
|
|
(f)
|
(20)
|
23
|
Exchange
differences on translating foreign operations:
|
|
|
|
Profit (loss) on translating foreign
operations
|
|
(175)
|
276
|
Loss (profit) on translating foreign
operations transferred to the Separate Consolidated Income Statement
|
|
−
|
−
|
Net fiscal impact
|
|
−
|
−
|
|
(g)
|
(175)
|
276
|
Share of other
comprehensive income (loss) of associates and joint ventures accounted for
using the equity method:
|
|
|
|
Profit (loss)
|
|
−
|
1
|
Loss (profit) transferred to the Separate
Consolidated Income Statement
|
|
−
|
−
|
Net fiscal impact
|
|
−
|
−
|
|
(h)
|
−
|
1
|
Total other components that will be
reclassified subsequently in the Separate Consolidated Income Statements
|
(i=e+f+g+h)
|
(180)
|
290
|
Total other components of the
Consolidated Statements of Comprehensive Income
|
(k=d+i)
|
(180)
|
290
|
Total comprehensive income (loss) for the
period
|
(a+k)
|
187
|
738
|
Attributable to:
|
|
|
|
Owners of the
Parent
|
|
280
|
587
|
Non-controlling
interests
|
|
(93)
|
151
|
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Consolidated
Statements of Comprehensive Income
|
61
|
Consolidated Statements of Changes in Equity
Changes in equity from January 1, 2013
to March 31, 2013
|
Equity attributable to owners of the
Parent
|
|
|
|
(millions of euros)
|
Share capital
|
Paid-in capital
|
Reserve for available-for-sale financial
assets
|
Reserve for cash flow hedges
|
Reserve for exchange differences on
translating foreign operations
|
Reserve for remeasurements of employee
defined benefit plans (IAS 19)
|
Share of other profits (losses) of
associates and joint ventures accounted for using the equity method
|
Other reserves and retained earnings
(accumulated losses), including profit (loss) for the period
|
Total
|
Equity attributable to Non-controlling
interests
|
Total Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012
|
10,604
|
1,704
|
43
|
(383)
|
504
|
154
|
(1)
|
6,753
|
19,378
|
3,634
|
23,012
|
Changes in equity during the period:
|
|
|
|
|
|
|
|
|
|
|
|
Dividends approved
|
|
|
|
|
|
|
|
|
−
|
(5)
|
(5)
|
Total comprehensive income (loss) for the
period
|
|
|
(10)
|
23
|
209
|
|
1
|
364
|
587
|
151
|
738
|
Effect of equity transactions of TI Media
|
|
|
|
|
|
|
|
(23)
|
(23)
|
23
|
−
|
Other changes
|
|
|
|
|
|
|
|
1
|
1
|
12
|
13
|
Balance at March 31, 2013
|
10,604
|
1,704
|
33
|
(360)
|
713
|
154
|
−
|
7,095
|
19,943
|
3,815
|
23,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in Equity from January 1, 2014 to March 31, 2014 Note 8
|
Equity attributable to owners of
the Parent
|
|
|
|
(millions of euros)
|
Share capital
|
Paid-in capital
|
Reserve for available-for-sale financial
assets
|
Reserve for cash flow hedges
|
Reserve for exchange differences on
translating foreign operations
|
Reserve for remeasurements of employee
defined benefit plans (IAS 19)
|
Share of other profits (losses) of
associates and joint ventures accounted for using the equity method
|
Other reserves and retained earnings
(accumulated losses), including profit (loss) for the period
|
Total
|
Equity attributable to Non-controlling
interests
|
Total Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
10,604
|
1,704
|
39
|
(561)
|
(377)
|
132
|
−
|
5,520
|
17,061
|
3,125
|
20,186
|
Changes in equity during the period:
|
|
|
|
|
|
|
|
|
|
|
|
Dividends approved
|
|
|
|
|
|
|
|
|
−
|
(12)
|
(12)
|
Total comprehensive income (loss) for the
period
|
|
|
15
|
(20)
|
63
|
|
|
222
|
280
|
(93)
|
187
|
Other changes
|
|
|
|
|
|
|
|
2
|
2
|
18
|
20
|
Balance at March 31, 2014
|
10,604
|
1,704
|
54
|
(581)
|
(314)
|
132
|
−
|
5,744
|
17,343
|
3,038
|
20,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Consolidated
Statements of Changes in Equity
|
62
|
Consolidated Statements of Cash Flows
(millions of euros)
|
|
note
|
1st Quarter
|
1st Quarter
|
|
|
|
2014
|
2013
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
Profit (loss) from continuing operations
|
|
|
234
|
351
|
Adjustments for:
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,070
|
1,149
|
Impairment
losses (reversals) on non-current assets (including investments)
|
|
|
−
|
105
|
Net change in
deferred tax assets and liabilities
|
|
|
105
|
164
|
Losses (gains)
realized on disposals of non-current assets (including investments)
|
|
|
(38)
|
(6)
|
Share of
losses (profits) of associates and joint ventures accounted for using the
equity method
|
|
|
5
|
−
|
Change in
provisions for employee benefits
|
|
|
(5)
|
11
|
Change in
inventories
|
|
|
(27)
|
(56)
|
Change in
trade receivables and net amounts due from customers on construction
contracts
|
|
|
(77)
|
209
|
Change in
trade payables
|
|
|
(496)
|
(971)
|
Net change in
current income tax receivables/payables
|
|
|
117
|
55
|
Net change in
miscellaneous receivables/payables and other assets/liabilities
|
|
|
(347)
|
(393)
|
Cash flows from
(used in) operating activities
|
(a)
|
|
541
|
618
|
Cash flows from investing activities:
|
|
|
|
|
Purchase of
intangible assets on an accrual basis
|
|
5)
|
(309)
|
(377)
|
Purchase of
tangible assets on an accrual basis
|
|
6)
|
(375)
|
(389)
|
Total purchase
of intangible and tangible assets on an accrual basis
|
|
|
(684)
|
(766)
|
Change in
amounts due to fixed asset suppliers
|
|
|
(569)
|
(479)
|
Total purchase
of intangible and tangible assets on a cash basis
|
|
|
(1,253)
|
(1,245)
|
Acquisition of
control of subsidiaries or other businesses, net of cash acquired
|
|
|
(9)
|
−
|
Acquisitions/disposals
of other investments
|
|
|
−
|
−
|
Change in
financial receivables and other financial assets
|
|
|
(110)
|
41
|
Proceeds from
sale that result in a loss of control of subsidiaries or other businesses,
net of cash disposed of
|
|
|
−
|
−
|
Proceeds from
sale/repayment of intangible, tangible and other non-current assets
|
|
|
74
|
25
|
Cash flows from
(used in) investing activities
|
(b)
|
|
(1,298)
|
(1,179)
|
Cash flows from financing activities:
|
|
|
|
|
Change in
current financial liabilities and other
|
|
|
65
|
(219)
|
Proceeds from
non-current financial liabilities (including current portion)
|
|
|
1,094
|
966
|
Repayments of
non-current financial liabilities (including current portion)
|
|
|
(2,108)
|
(1,307)
|
Share capital
proceeds/reimbursements (including subsidiaries)
|
|
|
−
|
−
|
Dividends paid
|
|
|
−
|
−
|
Changes in
ownership interests in consolidated subsidiaries
|
|
|
−
|
−
|
Cash flows from
(used in) financing activities
|
(c)
|
|
(949)
|
(560)
|
Cash flows from (used in) Discontinued
operations/Non-current assets held for sale
|
(d)
|
7)
|
(190)
|
117
|
Aggregate cash
flows
|
(e=a+b+c+d)
|
|
(1,896)
|
(1,004)
|
Net cash and cash
equivalents at beginning of the period
|
(f)
|
|
6,296
|
7,397
|
Net foreign exchange differences on net
cash and cash equivalents
|
(g)
|
|
(84)
|
58
|
Net cash and cash
equivalents at end of the period
|
(h=e+f+g)
|
|
4,316
|
6,451
|
|
|
|
|
|
Additional
Cash Flow Information
|
|
|
|
|
|
(millions of euros)
|
|
|
1st Quarter
|
1st Quarter
|
|
|
|
2014
|
2013
|
|
|
|
|
|
Income taxes (paid) received
|
|
|
(16)
|
(50)
|
Interest expense paid
|
|
|
(873)
|
(809)
|
Interest income received
|
|
|
158
|
134
|
Dividends received
|
|
|
−
|
−
|
|
|
|
|
|
Analysis of
Net Cash and Cash Equivalents
|
|
|
|
|
|
(millions of euros)
|
|
|
1st Quarter
|
1st Quarter
|
|
|
|
2014
|
2013
|
|
|
|
|
|
Net cash and cash
equivalents at beginning of the period
|
|
|
|
|
Cash and cash equivalents - from
continuing operations
|
|
|
5,744
|
6,947
|
Bank overdrafts repayable on demand –
from continuing operations
|
|
|
(64)
|
(39)
|
Cash and cash equivalents - from
Discontinued operations/Non-current assets held for sale
|
|
|
616
|
489
|
Bank overdrafts repayable on demand –
from Discontinued operations/Non-current assets held for sale
|
|
|
−
|
−
|
|
|
|
6,296
|
7,397
|
Net cash and cash
equivalents at end of the period
|
|
|
|
|
Cash and cash equivalents - from
continuing operations
|
|
|
3,945
|
5,870
|
Bank overdrafts repayable on demand –
from continuing operations
|
|
|
(55)
|
(25)
|
Cash and cash equivalents - from
Discontinued operations/Non-current assets held for sale
|
|
|
426
|
606
|
Bank overdrafts repayable on demand –
from Discontinued operations/Non-current assets held for sale
|
|
|
−
|
−
|
|
|
|
4,316
|
6,451
|
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Consolidated
Statements of Cash Flows
|
63
|
Note
1
Form, content and other general information
Telecom Italia
(the “Parent”) and its subsidiaries form the “Telecom Italia Group” or the
“Group”.
Telecom Italia is
a joint-stock company (S.p.A.) organized under the laws of the Republic of
Italy.
The registered
offices of the Parent Telecom Italia are located in Milan at Piazza degli
Affari 2, Italy.
The duration of
the company, as stated in the Company’s Bylaws, extends until December 31,
2100.
The Telecom
Italia Group operates mainly in Europe, the Mediterranean Basin and South
America.
The Group is
engaged principally in the communications sector and, particularly, the fixed
and mobile national and international telecommunications sector.
The Telecom
Italia Group condensed consolidated financial statements at March 31, 2014 have
been prepared on a going concern basis (for further details see the Note
“Accounting policies”) and in accordance with the International Financial
Reporting Standards issued by the International Accounting Standards Board and
approved by the European Union (designated as “IFRS”), as
well as the laws and regulations in force in Italy.
Specifically, the
Telecom Italia Group condensed consolidated financial statements at March 31,
2014 have been prepared in compliance with IAS 34 (Interim Reports) and,
as permitted by this standard, do not include all the information required in
the annual consolidated financial statements. Therefore, these financial
statements must be read in conjunction with the Telecom Italia Group
consolidated financial statements for 2013.
For purposes of
comparison, the consolidated statement of financial position at December 31,
2013, the separate consolidated income statement and the consolidated statement
of comprehensive income for the first quarter 2013, as well as the consolidated
statement of cash flows and the consolidated statement of changes in equity for
the first quarter of 2013 have been presented. Furthermore, following the
classification of the Sofora - Telecom Argentina group as discontinued
operations starting from the last quarter of 2013, the separate consolidated
income statement and the consolidated statement of cash flows for the first
quarter of 2013 have been restated accordingly.
The Telecom
Italia Group condensed consolidated financial statements are expressed in euro,
rounded to the nearest million, unless otherwise indicated.
Publication of
the Telecom Italia Group condensed consolidated financial statements for the
period ended March 31, 2014 was approved by resolution of the board of
directors’ meeting held on May 12, 2014.
Financial
statement formats
The financial
statement formats adopted are consistent with those indicated in IAS 1. In
particular:
·
the consolidated statement of financial position has been prepared by classifying assets and liabilities according
to the “current and non-current” criterion;
·
the separate consolidated income statement has been prepared by classifying operating expenses by nature of
expense as this form of presentation is considered more appropriate and
representative of the specific business of the Group, conforms to internal
reporting and is in line with the industrial sector of reference.
In addition to EBIT or Operating profit (loss), the separate
consolidated income statement includes the alternative performance measure of
EBITDA or Operating profit (loss) before depreciation and amortization, Capital
gains (losses) and Impairment reversals (losses) on non-current assets.
In particular, besides EBIT, EBITDA is used by Telecom Italia as the
financial target in internal presentations (business plans) and in external
presentations (to analysts and investors). It represents
a useful unit of measurement for the evaluation of the operating performance of
the Group (as a whole and at the Business Unit level). EBIT and EBITDA are
calculated as follows:
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Consolidated
Statements of Cash Flows
|
64
|
Profit (loss)
before tax from continuing operations
|
+
|
Finance expenses
|
-
|
Finance income
|
+/-
|
Other expenses (income) from investments
|
+/-
|
Share of losses (profits) of associates and joint
ventures accounted for using the equity method
|
EBIT- Operating
profit (loss)
|
+/-
|
Impairment losses (reversals) on non-current assets
|
+/-
|
Losses (gains) on disposals of non-current assets
|
+
|
Depreciation and amortization
|
EBITDA - Operating
profit (loss) before depreciation and amortization, Capital gains (losses)
and Impairment reversals (losses) on non-current assets
|
·
the consolidated statement of comprehensive income includes the profit (loss) for the period as shown in the separate
consolidated income statement and all other non-owner changes in equity;
·
the consolidated statement of cash flows has been prepared by presenting cash flows from operating
activities according to the “indirect method”, as permitted by IAS 7 (Statement
of Cash Flows).
An operating segment is a component of an entity:
·
that engages in business activities from which
it may earn revenues and incur expenses (including revenues and expenses
relating to transactions with other components of the same entity);
·
whose operating results are regularly reviewed
by the entity’s chief operating decision maker to make decisions about
resources (for Telecom Italia the Board of Directors) to be allocated to the
segment and assess its performance; and
·
for which discrete financial information is
available.
In particular,
the operating segments of the Telecom Italia Group are organized according to
the relative geographical location for the telecommunications business
(Domestic and Brazil) and according to the specific businesses for the other
segments. Additionally, following the inclusion of the Sofora – Telecom
Argentina group under Discontinued operations in the fourth quarter of 2013,
the Argentina Business Unit is no longer shown.
The term
“operating segment” is considered synonymous with “Business Unit”.
The operating
segments of the Telecom Italia Group are as follows:
·
Domestic:
includes operations in Italy for voice and data
services on fixed and mobile networks for final customers (retail) and other
operators (wholesale), the operations of the Telecom Italia Sparkle group (International
wholesale), the operations of the Olivetti group (office products and services
for Information Technology), as well as the relative support activities. Since
the first quarter of 2014 the operations of Olivetti group have been
consolidated under the Domestic Business Unit. This different presentation
reflects the commercial and business placement of the Olivetti group and the
process of integrating of its products and services offered by TelecomItalia in
the domestic market. Accordingly, the figures for the corresponding period of
the previous year have been reclassified on a consistent basis;
·
Brazil: includes mobile (TIM Celular) and fixed (TIM Celular and Intelig)
telecommunications operations in Brazil;
·
Media: performs network operator activities through Telecom Italia Media
Broadcasting;
·
Other
Operations: includes finance companies and other minor
companies not strictly related to the core business of the Telecom Italia
Group.
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 1
Form, content and other general information
|
65
|
Note 2
Accounting policies
The condensed consolidated financial statements at March 31, 2014 have been prepared on a going concern basis as there is the reasonable expectation that Telecom Italia will continue its operational activities in the foreseeable future (and in any event with a time horizon of at least twelve months).
In particular, consideration has been given to the following factors, which Management believes, at this time, are not such as to generate doubts as to the Group’s ability to continue as a going concern:
• the main risks and uncertainties (that are for the most part of an external nature) to which the Group and the various activities of the Telecom Italia Group are exposed:
– changes in the general macroeconomic situation in the Italian, European and South American markets, as well as the volatility of financial markets in the Eurozone;
– variations in business conditions;
– changes to laws and regulations (price and rate variations);
– outcomes of disputes and litigations with regulatory authorities, competitors and other parties;
– financial risks (interest rate and/or exchange rate trends, changes in credit rating by rating agencies);
• the mix between equity and debt capital considered optimal as well as the policy for the remuneration of equity, as described in the paragraph “Share capital information” under the Note “Equity” in the annual consolidated financial statements at December 31, 2013;
• the policy for financial risk management (market risk, credit risk and liquidity risk), as described in the Note “Financial risk management” in the annual consolidated financial statements at December 31, 2013.
Accounting policies and principles of consolidation
The accounting policies and consolidation principles adopted in the preparation of the condensed consolidated financial statements at March 31, 2014 are the same as those adopted in the Telecom Italia Group annual consolidated financial statements at December 31, 2013, to which reference can be made, except for:
• the use of the new standards/interpretations adopted by the Group since January 1, 2014, described below;
• the adjustments required by the nature of the interim measurements.
Furthermore, in the condensed consolidated financial statements at March 31, 2014, income tax expense for the period of the individual consolidated companies are calculated according to the best possible estimate based on available information and on a reasonable forecast of performance up to the end of the tax period. Conventionally, the income tax liabilities (current and deferred) on the profit for the interim period of the individual consolidated companies are recorded net of advances and tax receivables (limited to those for which refunds have not been requested), as well as deferred tax assets, and classified in “Deferred tax liabilities”. If that balance is an asset, it is conventionally recognized in “Deferred tax assets”.
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Note 1 Form, content and other general information |
66 |
The preparation of the condensed consolidated financial statements at March 31, 2014 and related disclosure in conformity with IFRS requires management to make estimates and assumptions based also on subjective judgments, past experience and scenarios considered reasonable and realistic in relation to the information known at the time of the estimate. Such estimates have an effect on the reported amount of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements, as well as the amount of revenues and costs during the year. Actual results could differ, even significantly, from those estimates owing to possible changes in the factors considered in the determination of such estimates. Estimates are reviewed periodically.
In relation to the most important accounting estimates, reference should be made to the information provided in the annual consolidated financial statements at December 31, 2013.
New Standards and Interpretations endorsed by EU in force from January 1, 2014
In accordance with IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), the IFRS in force starting from January 1, 2014 are indicated and briefly illustrated below.
• Amendments to IAS 32 (Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities)
On December 13, 2012, Regulation EU no. 1256-2012 was issued, applying several amendments made by the IASB to IAS 32 Financial Instruments: Presentation,to clarify the application of certain criteria for offsetting financial assets and liabilities set out in IAS 32. The amendments to IAS 32 must be adopted retrospectively from January 1, 2014. The adoption of these amendments had no impact on the condensed consolidated financial statements at March 31, 2014.
• Amendments to IAS 36 (Disclosures on the recoverable amount of non-financial assets)
On December 19, 2013, Regulation EU no. 1374-2013 was issued, applying several amendments to IAS 36 Impairment of Assets, entitled Disclosures on the recoverable amount of non-financial assets (Amendments to IAS 36) at EU level. These amendments govern the disclosure to be provided on the recoverable amount of impaired assets, if that amount is based on the fair value less costs to sell. Those amendments must be adopted retrospectively from January 1, 2014. The adoption of the amendments had no impact on the disclosure provided in these condensed consolidated financial statements.
• Amendments to IAS 39(Novation of derivatives and continuation of hedge accounting)
On December 19, 2013 Regulation EU no. 1375-2013 was issued, applying an amendment to IAS 39 Financial Instruments: Recognition and Measurement, entitled Novation of derivatives and continuation of hedge accounting (Amendments to IAS 39). The amendments permit the continuation of hedge accounting in the event that a hedging derivative is novated as a result of the application of laws or regulations, in order to replace the original counterpart to guarantee the fulfillment of the obligation undertaken and if specific conditions are met. This amendment will also be included in IFRS 9 Financial Instruments. Said amendments must be adopted retrospectively from January 1, 2014. The adoption of these amendments had no impact on the condensed consolidated financial statements at March 31, 2014.
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Note 2
Accounting policies |
67 |
New Standards and
Interpretations issued by the IASB but not yet endorsed by the EU
•
IFRIC 21 (Levies)
In May 2013 the
IASB issued IFRIC 21 Levies, an interpretation of IAS 37 Provisions,
Contingent Liabilities and Contingent Assets. This interpretation provides
guidance about the recognition of liabilities for the payment of levies other
than income tax expense. IFRIC 21 must be applied from January 1, 2014. No
significant effects are expected from the first-time application of IFRIC 21.
•
Other Standards and Interpretations issued by
the IASB but not yet endorsed by the EU
|
Mandatory application starting
from:
|
|
|
Amendments to IAS 19: Employee Contributions to Defined Benefit Plans
|
1/1/2015
|
Improvements to the IFRS (2010–2012 cycle)
|
1/1/2015
|
Improvements to the IFRS (2011-2013 cycle)
|
1/1/2015
|
IFRS 14 (Regulatory Deferral Accounts)
|
1/1/2016
|
Accounting for the acquisition of interestsin joint operations
(Amendments to IFRS 11 – Joint Arrangements)
|
1/1/2016
|
IFRS 9 (Financial Instruments) and subsequent amendments
|
N.A.
|
The potential impacts arising from their application on the
consolidated financial statements are currently being assessed.
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 2
Accounting
policies
|
68
|
Note 3
Scope of consolidation
The changes in the scope of consolidation
at March 31, 2014 compared to December 31, 2013 are listed below.
Continuing
operations:
Entry of companies in the scope of
consolidation:
Company
|
|
Business Unit
|
Month
|
|
|
|
|
TRENTINO NGN S.R.L
|
Acquisition of control
|
Domestic
|
February 2014
|
|
|
|
|
Discontinued
operations/Non-current assets held for sale
Exit of companies from the scope
of
consolidation:
Company
|
|
Business Unit
|
Month
|
|
|
|
|
SPRINGVILLE
S.A.
|
sold
|
Argentina
|
February 2014
|
The breakdown by number of subsidiaries
and associates of the Telecom Italia Group is as follows:
|
3/31/2014
|
Companies:
|
Italy
|
Outside
Italy
|
Total
|
|
|
|
|
subsidiaries
consolidated line-by-line(*)
|
39
|
61
|
100
|
associates
accounted for using the equity method
|
13
|
-
|
13
|
Total companies
|
52
|
61
|
113
|
|
12/31/2013
|
Companies:
|
Italy
|
Outside
Italy
|
Total
|
|
|
|
|
subsidiaries
consolidated line-by-line(*)
|
38
|
62
|
100
|
associates
accounted for using the equity method
|
14
|
-
|
14
|
Total companies
|
52
|
62
|
114
|
|
3/31/2013
|
Companies:
|
Italy
|
Outside
Italy
|
Total
|
|
|
|
|
subsidiaries
consolidated line-by-line(*)
|
41
|
61
|
102
|
associates
accounted for using the equity method
|
15
|
-
|
15
|
Total companies
|
56
|
61
|
117
|
(*)
Including subsidiaries posted under Discontinued operations/Non-current assets
held for sale.
Telecom Italia Group Condensed
Consolidated Financial Statements
at March 31, 2014
|
Note 2
Accounting policies
|
69
|
Note 4
Goodwill
Goodwill shows the
following breakdown and changes during the first three months of 2014:
(millions of euros)
|
12/31/2013
|
Increase
|
Decrease
|
Impairments
|
Exchange
differences
|
3/31/2014
|
|
|
|
|
|
|
|
Domestic
|
28,443
|
|
|
|
|
28,443
|
Core
Domestic
|
28,028
|
3
|
|
|
|
28,031
|
International
Wholesale
|
415
|
|
(3)
|
|
|
412
|
Brazil
|
1,468
|
|
|
|
52
|
1,520
|
Media
|
21
|
|
|
|
|
21
|
Other
Operations
|
−
|
|
|
|
|
−
|
Total
|
29,932
|
−
|
−
|
−
|
52
|
29,984
|
The
increases and decreases, relating respectively to Core Domestic and
International Wholesale, are connected to the assignment of a portion of
goodwill following the transfer by Telecom Italia Sparkle S.p.A. to Telecom
Italia S.p.A. of the entire investment held in Telecom Italia San Marino.
The
increase of 52 million euros is due to exchange differences relating to the
goodwill of the Brazil Business Unit.
In
accordance with IAS 36, goodwill is not amortized, but is tested for impairment
annually or more frequently if specific events or circumstances indicate that
it may be impaired. At March 31, 2014, Telecom Italia’s market capitalization,
as already noted at December 31, 2013, was less than the Equity value. The
Company therefore repeated the impairment testing. This process did not
identify any impairment loss, at March 31, 2014, as the estimate of the
recoverable amount of all the CGUs examined was higher than their carrying
amount.
The
impairment test at March 31, 2014 was carried out on two levels. At a first
level, an estimate was made of the recoverable amount of the individual Cash
Generating Units (or groups of units) to which goodwill is allocated and at a
second level the group was considered as a whole.
The Cash
Generating Units (or groups of units) to which goodwill has been allocated are
the following:
Segment
|
Cash Generating
Units (or groups of units)
|
|
|
Domestic
|
Core
Domestic
|
|
International
Wholesale
|
Brazil
|
Tim Brasil group
|
Media
|
Telecom Italia
Media group
|
The value
used to determine the recoverable amount of the Cash Generating Units (or
groups of units) to which goodwill has been allocated is the value in use for
the CGUs of the Domestic segment; the recoverable amount of the Brazil and Media
CGUs is instead based on market capitalization (fair value).
For the
Core Domestic and International Wholesale CGUs the formal estimate of
recoverable amount has been made using the same method adopted for the annual
impairment test at December 31, 2013, updating the related inputs (expected
earnings flows, cost of capital, long-term growth rate, capital expenditure
rate).
The main
variables that had a significant influence on the value in use, for the two
CGUs for which this value is used (Core Domestic and International Wholesale),
are detailed in the table below:
|
|
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014
|
Note 3
Scope of consolidation
|
70
|
|
|
|
|
Core
Domestic
|
International
Wholesale
|
|
|
EBITDA Margin
(EBITDA/revenues)
during the period
of the plan
|
EBITDA Margin
(EBITDA/revenues)
during the period
of the plan
|
Growth of EBITDA during
the period of the plan
|
Growth of EBITDA
during the period of the plan
|
Capital
expenditure rate (capex/revenues)
|
Capital
expenditure rate (capex/revenues)
|
Cost of capital
|
Cost of capital
|
Long-term growth
rate
|
Long-term growth
rate
|
The
estimate of the value in use for the CGUs examined is based on the forecast for
2014 and the Industrial Plan forecast.
The
nominal growth rates used to estimate the terminal value are the following:
Core Domestic
|
International
Wholesale
|
|
|
+0.0%
|
+0.0%
|
In particular,
the growth rates for the CGUs of the Domestic segment are in line with the
range of growth rates applied by the analysts who follow Telecom Italia shares
(as can be gathered from the reports published after the presentation of the
industrial plan).
Since the
growth rate in the terminal value is in relation to the level of capital
expenditures (capex) necessary to sustain that growth, for the estimate of the
earnings flow to be capitalized, a level of capital expenditure
(capex/revenues) of the Core Domestic CGU in line with the median of the
analysts’ terminal year forecasts was used.
The cost
of capital was estimated by considering the following:
• the
criterion applied was the Capital Asset Pricing Model – CAPM estimate (the
criterion used by the Group to estimate the value in use referred to in Annex A
of IAS 36);
• in
the case of International Wholesale, a “full equity” financial structure was
considered since it is representative of the normal financial structure of the
business; for the Core Domestic CGU, a Group target financial structure was
assumed in line with the average of the European telephone incumbents,
including Telecom Italia;
• the
Beta coefficient for the Core Domestic CGU and the International Wholesale CGU
was arrived at by using the Beta coefficients of the European telephone
incumbents, including Telecom Italia, adjusted to take into account the
financial structure (Core Domestic CGU beta coefficient = 1.22; International
Wholesale CGU beta coefficient = 0.76 (unlevered beta));
• for
the Core Domestic CGU a base estimate of weighted average cost of capital
(WACC) was used.
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 4
Goodwill
|
71
|
On the
basis of these elements, the post-tax and pre-tax weighted average cost of
capital and the related capitalization rates (WACC–g) have been estimated for each
Cash Generating Unit as follows:
|
Core Domestic
%
|
International
Wholesale
%
|
|
|
|
WACC post-tax
|
7.99
|
8.22
|
WACC post-tax – g
|
7.99
|
8.22
|
WACC pre-tax
|
11.57
|
12.03
|
WACC pre-tax – g
|
11.57
|
12.03
|
The
recoverable amount of all the CGUs at March 31, 2014 was higher than the
carrying amount of operating capital.
With
regard to the Core Domestic and International Wholesale CGUs, given that their
recoverable amount is essentially in line with their carrying amount, for the
purposes of the sensitivity analysis it should be noted that a negative change
in the main key variables listed above would have resulted in an impairment
loss.
A second
level impairment test was then conducted to test for impairment at the level of
the entire Group, in order to include the Central Functions and the financial
Cash Generating Units of the Group without any goodwill allocation (Olivetti).
The total recoverable amount of all the Cash Generating Units of the Group was
compared to the carrying amount of the total operating capital referring to the
same units/segments post-first level impairment testing. No impairment losses
were identified at this additional level of impairment testing.
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 4
Goodwill
|
72
|
Note
5
Other intangible assets
Other intangible assets decreased 100
million euros compared to December 31, 2013.
Details on the composition and changes are as follows:
(millions of euros)
|
12/31/2013
|
Additions
|
Amortization
|
Impairment (losses) / reversals
|
Disposals
|
Exchange differences
|
Other changes
|
3/31/2014
|
|
|
|
|
|
|
|
|
|
Industrial patents and intellectual
property
rights
|
2,332
|
112
|
(325)
|
|
|
30
|
102
|
2,251
|
Concessions, licenses, trademarks and
similar rights
|
3,394
|
5
|
(89)
|
|
|
22
|
2
|
3,334
|
of which
Licenses with an indefinite useful life
|
−
|
|
|
|
|
|
|
−
|
Other intangible assets with a finite
useful life
|
257
|
18
|
(51)
|
|
|
1
|
(1)
|
224
|
Work in progress and advance payments
|
297
|
174
|
|
|
|
2
|
(102)
|
371
|
Total
|
6,280
|
309
|
(465)
|
−
|
−
|
55
|
1
|
6,180
|
Additions in
the first three months of 2014 also include 64 million euros of internally
generated assets (73 million euros in the first three months of 2013).
Industrial patents
and intellectual property rights at March 31,
2014 essentially consisted of applications software purchased outright and user
license rights acquired, and relate to Telecom Italia S.p.A. (1,348 million
euros) and the Brazil Business Unit (870 million euros).
Concessions,
licenses, trademarks and similar rights at March
31, 2014 mainly related to:
• unamortized
cost of telephone licenses and similar rights (2,294 million euros for Telecom
Italia S.p.A. and 501 million euros for the Brazil Business Unit);
• Indefeasible
Rights of Use - IRU (253 million euros) mainly relate to companies of the
Telecom Italia Sparkle group (International Wholesale);
• TV
frequencies of the Media Business Unit (101 million euros). The expiry of the
user licenses for the frequencies used for digital terrestrial transmission was
rescheduled as a result of their definitive assignment up to 2032. Accordingly,
the amortization period will end in that year instead of in 2028, without
significant impacts on either the current or future periods.
Other intangible
assets with a finite useful life at March 31,
2014 essentially consisted of 198 million euros of capitalized subscriber
acquisition costs (SAC) connected with certain commercial deals offered by
Telecom Italia S.p.A..
Telecom Italia Group Condensed
Consolidated Financial
Statements at March 31, 2014
|
Note 4
Goodwill
|
73
|
Note
6
Tangible assets
(owned and under finance leases)
Property, plant and equipment owned
Property, plant and equipment owned
decreased 117 million euros compared to December 31, 2013. Details on the
composition and changes are as follows:
(millions of euros)
|
12/31/2013
|
Additions
|
Depreciation
|
Impairment (losses) / reversals
|
Disposals
|
Exchange differences
|
Other changes
|
3/31/2014
|
|
|
|
|
|
|
|
|
|
Land
|
135
|
|
|
|
(3)
|
|
|
132
|
Buildings (civil and industrial)
|
380
|
1
|
(11)
|
|
(34)
|
1
|
1
|
338
|
Plant and equipment
|
10,594
|
216
|
(515)
|
|
(2)
|
76
|
261
|
10,630
|
Manufacturing and distribution equipment
|
41
|
1
|
(4)
|
|
|
|
1
|
39
|
Other
|
454
|
5
|
(44)
|
|
(1)
|
6
|
38
|
458
|
Construction in progress and advance
payments
|
695
|
148
|
|
|
|
5
|
(263)
|
585
|
Total
|
12,299
|
371
|
(574)
|
−
|
(40)
|
88
|
38
|
12,182
|
Additions in the first three months of
2014 also include 62 million euros of internally generated assets (65 million
euros in the first three months of 2013).
Net other changes were essentially
attributable to the effects of the acquisition of the controlling stake in
Trentino NGN S.r.l. on February 28, 2014.
Assets held under finance
leases
Assets held under finance leasesdecreased
33 million euros compared to December 31, 2013. Details on the composition and
changes are as follows:
(millions of euros)
|
12/31/2013
|
Additions
|
Depreciation
|
Other changes
|
3/31/2014
|
|
|
|
|
|
|
Buildings (civil and industrial)
|
883
|
2
|
(30)
|
7
|
862
|
Other
|
5
|
|
(1)
|
|
4
|
Construction in progress and advance
payments
|
32
|
2
|
|
(13)
|
21
|
Total
|
920
|
4
|
(31)
|
(6)
|
887
|
Telecom Italia Group Condensed
Consolidated Financial Statements
at March 31, 2014
|
Note 4
Goodwill
|
74
|
Note
7
Discontinued operations/Non-current assets held for sale
Starting from the fourth quarter of 2013 the Sofora - Telecom Argentina
group has been classified as discontinued operations. Accordingly, the related
figures are classified under "Discontinued operations/Non-current assets
held for sale" and "Liabilities directly associated with Discontinued
operations/Non-current assets held for sale" in the consolidated statement
of financial position.
Agreements for the disposal of the Sofora –
Telecom Argentina group
On November 13, 2013, the purchase offer,
made by the Fintech group, for the entire controlling interest held in the
Sofora - Telecom Argentina group, was accepted by Telecom Italia S.p.A. and its
subsidiaries Telecom Italia International and Tierra Argentea, for a total
amount of USD 960 million.
In implementation of the above-mentioned
agreements, on December 10, 2013, the class B shares of Telecom Argentina and
the class B shares of Nortel owned by Tierra Argentea were sold for total
amount of USD 108.7 million. As a result, the Telecom Italia Group's economic
interest in Telecom Argentina has now been reduced to 19.3% (22.7% at December
31, 2012).
Conversely, obtaining the necessary
authorizations is the condition precedent for the sale of the Sofora shares
held by Telecom Italia S.p.A. and its subsidiary Telecom Italia International.
Further details are
provided in the Telecom Italia Group consolidated financial statements at
December 31, 2013.
— • —
The breakdown of the assets and
liabilities of the Sofora - Telecom Argentina group is provided below:
(millions of euros)
|
|
3/31/2014
|
12/31/2013
|
|
|
|
|
Discontinued operations/Non-current assets
held for sale
|
|
|
|
of a financial nature
|
|
508
|
657
|
of a non-financial nature
|
|
2,500
|
2,871
|
Total
|
(a)
|
3,008
|
3,528
|
Liabilities directly associated with
Discontinued operations/Non-current assets held for sale
|
|
|
|
of a financial nature
|
|
27
|
27
|
of a non-financial nature
|
|
1,254
|
1,534
|
Total
|
(b)
|
1,281
|
1,561
|
Net value of the assets related to the
disposal group
|
(a-b)
|
1,727
|
1,967
|
The amounts accumulated in Equity through
the Comprehensive income statement relate to the "Reserve for exchange
differences on translating foreign operations", and total -1,384 million
euros (-1,019 million euros at December 31, 2013).
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 5
Other
intangible assets
|
75
|
The assets of a financial nature are broken down as follows:
(millions of euros)
|
|
3/31/2014
|
12/31/2013
|
|
|
|
|
Non-current financial assets
|
|
63
|
27
|
Current financial assets
|
|
445
|
630
|
Total
|
|
508
|
657
|
The assets of a non-financial nature are broken down as follows:
(millions of euros)
|
|
3/31/2014
|
12/31/2013
|
|
|
|
|
Non-current assets
|
|
2,017
|
2,322
|
Intangible
assets
|
|
690
|
825
|
Tangible
assets
|
|
1,306
|
1,473
|
Other
non-current assets
|
|
21
|
24
|
Current assets
|
|
483
|
549
|
Total
|
|
2,500
|
2,871
|
The liabilities of a financial nature are broken down as follows:
(millions of euros)
|
|
3/31/2014
|
12/31/2013
|
|
|
|
|
Non-current financial liabilities
|
|
25
|
25
|
Current financial liabilities
|
|
2
|
2
|
Total
|
|
27
|
27
|
The liabilities of a non-financial
nature are broken down as follows:
(millions of euros)
|
|
3/31/2014
|
12/31/2013
|
|
|
|
|
Non-current liabilities
|
|
416
|
491
|
Current liabilities
|
|
838
|
1,043
|
Total
|
|
1,254
|
1,534
|
— • —
The items relating to "Profit/(loss)
from Discontinued operations/Non-current assets held for sale" in the
separate consolidated income statements are shown below:
(millions of euros)
|
|
1st Quarter
|
1st Quarter
|
|
|
2014
|
2013
|
|
|
|
BU
|
Income statement effects from
Discontinued operations/Non-current assets held for sale:
|
|
|
|
Revenues
|
|
718
|
917
|
Other income
|
|
1
|
1
|
Operating expenses
|
|
(516)
|
(647)
|
Depreciation and amortization, gains
(losses) on disposals and impairment losses on non-current assets
|
|
|
(143)
|
Operating profit (loss) (EBIT)
|
|
203
|
128
|
Finance income (expenses), net
|
|
(3)
|
21
|
Profit (loss) before tax from
Discontinued operations/Non-current assets held for sale
|
|
200
|
149
|
Income tax expense
|
|
(67)
|
(52)
|
Profit (loss) from Discontinued
operations/Non-current assets held for sale
|
|
133
|
97
|
The income statement effects relate
entirely to the Sofora - Telecom Argentina group.
Also, the consolidated statements of
comprehensive income include translation of foreign operations losses of the
Sofora - Telecom Argentina group, of 365 million euros at March, 31 2014 and 17
million euros at March, 31 2013. Consequently, the overall result from
Discontinued operations/Non-current assets held for sale was negative by 232
million euros at March, 2014 and was positive by 80 million euros at March, 31
2013.
— • —
Within the consolidated statements of
cash flows the net impacts, expressed in terms of contributionto the
consolidation, of the “Discontinued operations/Non-current assets held for
sale” are broken down
as follows:
(millions of euros)
|
|
1st Quarter
|
1st Quarter
|
|
|
2014
|
2013
|
Discontinued operations/Non-current
assets held for sale
|
|
|
|
Cash flows from (used in) operating
activities
|
|
69
|
196
|
Cash flows from (used in) investing
activities
|
|
(246)
|
(78)
|
Cash flows from (used in) financing
activities
|
|
(13)
|
(1)
|
Total
|
|
(190)
|
117
|
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note
7
Discontinued
operations/Non-current assets
held for sale
|
77
|
Note 8
Equity
Equity is composed as follows:
(millions of euros) |
3/31/2014 |
12/31/2013 |
|
|
|
Equity attributable to owners of the Parent |
17,343 |
17,061 |
Equity attributable to Non-controlling interests |
3,038 |
3,125 |
Total |
20,381 |
20,186 |
The composition of Equity attributable to owners of the Parent is the following:
(millions of euros) |
|
3/31/2014 |
|
12/31/2013 |
|
|
|
|
|
Share capital |
|
10,604 |
|
10,604 |
Paid-in capital |
|
1,704 |
|
1,704 |
Other reserves and retained earnings (accumulated losses), including profit (loss) for the period |
|
5,035 |
|
4,753 |
Reserve for available-for-sale financial assets |
54 |
|
39 |
|
Reserve for cash flow hedges |
(581) |
|
(561) |
|
Reserve for exchange differences on translating foreign operations |
(314) |
|
(377) |
|
Reserve for remeasurements of employee defined benefit plans (IAS 19) |
132 |
|
132 |
|
Share of other profits (losses) of associates and joint ventures accounted for using the equity method |
− |
|
− |
|
Other reserves and retained earnings (accumulated losses), including profit (loss) for the period |
5,744 |
|
5,520 |
|
Total |
|
17,343 |
|
17,061 |
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Note 7
Discontinued operations/Non-current assets
held for sale |
78 |
Future potential
changes in share capital
The table below reports future potential
changes in share capital connected with the “Guaranteed Subordinated Mandatory
Convertible Bonds due 2016, convertible into ordinary shares of Telecom Italia
S.p.A.” issued in November 2013 by Telecom Italia Finance S.A., with the
authorizations to increase the share capital existing at March 31, 2014 and the
options and rights granted under equity compensation plans still outstanding at
March 31, 2014:
|
Number of maximum
shares issuable
|
Share capital
(thousands of euros) (*)
|
Paid-in
capital
(thousands of euros)
|
Subscription price
per share
(euro)
|
Additional capital increases not yet approved (ordinary
shares)
|
|
|
|
|
Resolution by the shareholders’ meeting
held on April 8, 2009 (**)
|
1,600,000,000
|
880,000
|
n.a.
|
n.a.
|
“Long Term Incentive Plan 2010-2015”
(bonus capital increase)
|
197,883
|
109
|
-
|
-
|
“Long Term Incentive Plan 2012”
(capital increase in cash for Selected
Management)
|
n.a.
|
4,540
|
n.a.
|
n.a.
|
“Long Term Incentive Plan 2012”
(bonus capital increase for Selected
Management)
|
n.a.
|
4,540
|
-
|
-
|
“Long Term Incentive Plan 2012”
(bonus capital increase for Top
Management)
|
n.a.
|
2,995
|
-
|
-
|
Resolution by the shareholders’ meeting
held on April 17, 2013
|
72,000,000
|
39,600
|
n.a.
|
n.a.
|
Total additional capital increases not yet approved (ordinary
shares)
|
|
931,784
|
|
|
2013 Guaranteed
Subordinated Mandatory Convertible Bonds (ordinary shares)
– principal
– interest portion
|
n.a.
n.a.
|
1,300,000
238,875
|
n.a.
n.a.
|
n.a.
n.a.
|
2013 Guaranteed Subordinated Mandatory Convertible Bonds
(ordinary shares)
|
|
1,538,875
|
|
|
Total
|
|
2,470,659
|
|
|
(*) Amounts
stated for capital increases connected with incentive plans and the “Guaranteed
Subordinated Mandatory Convertible Bonds due 2016, convertible into ordinary
shares of Telecom Italia S.p.A.” are the “total estimated value” inclusive of
any premiums.
(**) Expired on
April 8, 2014.
For further details, see the Note
“Financial liabilities (non-current and current)” and the Telecom Italia Group
consolidated financial statements for the year 2013.
Telecom Italia Group Condensed
Consolidated Financial
Statements at March 31, 2014
|
Note 7
Discontinued
operations/Non-current assets
held for sale
|
79
|
Note
9
Financial liabilities
(non-current and current)
Non-current
and current financial liabilities (gross financial
debt) are composed as follows:
(millions of euros)
|
|
3/31/2014
|
12/31/2013
|
|
|
|
|
Financial payables (medium/long-term):
|
|
|
|
Bonds
|
|
21,844
|
22,060
|
Convertible
bonds
|
|
1,441
|
1,454
|
Amounts due to
banks
|
|
4,092
|
4,087
|
Other
financial payables
|
|
355
|
356
|
|
|
27,732
|
27,957
|
Finance lease liabilities
(medium/long-term)
|
|
1,069
|
1,100
|
Other financial liabilities
(medium/long-term):
|
|
|
|
Hedging
derivatives relating to hedged items classified as non-current assets/liabilities
of a financial nature
|
|
2,144
|
2,026
|
Non-hedging
derivatives
|
|
95
|
−
|
Other
liabilities
|
|
−
|
1
|
|
|
2,239
|
2,027
|
Total non-current financial liabilities
|
(a)
|
31,040
|
31,084
|
Financial payables (short-term):
|
|
|
|
Bonds
|
|
1,873
|
2,503
|
Convertible
bonds
|
|
30
|
10
|
Amounts due to
banks
|
|
2,489
|
2,790
|
Other
financial payables
|
|
374
|
400
|
|
|
4,766
|
5,703
|
Finance lease liabilities (short-term)
|
|
187
|
193
|
Other financial liabilities (short-term):
|
|
|
|
Hedging
derivatives relating to hedged items classified as current assets/liabilities
of a financial nature
|
|
221
|
207
|
Non-hedging
derivatives
|
|
8
|
16
|
Other
liabilities
|
|
−
|
−
|
|
|
229
|
223
|
Total current financial liabilities
|
(b)
|
5,182
|
6,119
|
Financial liabilities directly associated
with Discontinued operations/Non-current assets held for sale
|
(c)
|
27
|
27
|
Total Financial liabilities (Gross
financial debt)
|
(a+b+c)
|
36,249
|
37,230
|
The subordinated fixed-rate equity-linked
bond issue of 1,300 million euros with mandatory conversion in Telecom Italia
ordinary shares at maturity (2016), issued in November 2013 by Telecom Italia
Finance S.A. and guaranteed by Telecom Italia S.p.A., has been classified under
Financial liabilities.
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 8
Equity
|
80
|
Gross financial
debt according to the original currency of the transaction is as follows:
|
3/31/2014
|
12/31/2013
|
|
(millions of foreign currency)
|
(millions of euros)
|
(millions of foreign
currency)
|
(millions of euros)
|
|
|
|
|
|
USD
|
8,986
|
6,517
|
8,925
|
6,472
|
GBP
|
2,577
|
3,111
|
2,536
|
3,043
|
BRL
|
3,357
|
1,076
|
3,258
|
1,008
|
JPY
|
20,052
|
141
|
19,873
|
137
|
ARS
|
-
|
-
|
64
|
7
|
EURO
|
|
25,377
|
|
26,536
|
|
|
36,222
|
|
37,203
|
Discontinued operations
|
|
27
|
|
27
|
|
|
36,249
|
|
37,230
|
The breakdown of gross financial debt by
effective interest rate bracket, excluding the effect of any hedging
instruments, is provided below:
(millions of euros)
|
3/31/2014
|
12/31/2013
|
|
|
|
Up to 2.5%
|
5,107
|
5,578
|
From 2.5% to 5%
|
6,876
|
6,042
|
From 5% to 7.5%
|
16,622
|
16,936
|
From 7.5% to 10%
|
3,315
|
4,503
|
Over 10%
|
601
|
468
|
Accruals/deferrals, MTM and derivatives
|
3,701
|
3,676
|
|
36,222
|
37,203
|
Discontinued operations
|
27
|
27
|
|
36,249
|
37,230
|
Following the use of derivative hedging
instruments, on the other hand, the gross financial debt by nominal interest
rate bracket is:
(millions of euros)
|
3/31/2014
|
12/31/2013
|
|
|
|
Up to 2.5%
|
6,340
|
6,452
|
From 2.5% to 5%
|
9,944
|
9,051
|
From 5% to 7.5%
|
12,470
|
13,465
|
From 7.5% to 10%
|
2,699
|
4,022
|
Over 10%
|
1,068
|
537
|
Accruals/deferrals, MTM and derivatives
|
3,701
|
3,676
|
|
36,222
|
37,203
|
Discontinued operations
|
27
|
27
|
|
36,249
|
37,230
|
|
|
|
|
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 8
Equity
|
81
|
The maturities
of financial liabilities according to the expected nominal repayment amount, as
defined by contract, are the following:
Details of the
maturities of financial liabilities – at nominal repayment amount:
|
maturing by March
31 of the year:
|
(millions of euros)
|
2015
|
2016
|
2017
|
2018
|
2019
|
After 2019
|
Total
|
|
|
|
|
|
|
|
|
Bonds (*)
|
1,449
|
3,336
|
1,400
|
1,906
|
3,475
|
11,407
|
22,973
|
Loans and other financial liabilities
|
2,432
|
1,178
|
737
|
824
|
749
|
1,628
|
7,548
|
Finance lease liabilities
|
171
|
121
|
131
|
143
|
147
|
526
|
1,239
|
Total
|
4,052
|
4,635
|
2,268
|
2,873
|
4,371
|
13,561
|
31,760
|
Current financial liabilities
|
419
|
-
|
-
|
-
|
-
|
-
|
419
|
Total
excluding Discontinued Operations
|
4,471
|
4,635
|
2,268
|
2,873
|
4,371
|
13,561
|
32,179
|
Discontinued operations
|
26
|
-
|
-
|
-
|
-
|
-
|
26
|
Total
|
4,497
|
4,635
|
2,268
|
2,873
|
4,371
|
13,561
|
32,205
|
(*) With regard to the Mandatory Convertible
Bond due 2016, classified under “Convertible bonds”, the cash repayment has not
been considered because its settlement will take place together with the
mandatory conversion into shares.
The main components of financial
liabilities are commented below.
Bondsare broken
down as follows:
(millions of euros)
|
3/31/2014
|
12/31/2013
|
|
|
|
Non-current portion
|
21,844
|
22,060
|
Current portion
|
1,873
|
2,503
|
Total carrying
amount
|
23,717
|
24,563
|
Fair value adjustment and measurements at
amortized cost
|
(744)
|
(978)
|
Total nominal
repayment amount
|
22,973
|
23,585
|
Convertible bondsrelate entirely to the Mandatory Convertible Bond maturing in 2016,
and are broken down as follows:
(millions of euros)
|
3/31/2014
|
12/31/2013
|
|
|
|
Non-current portion
|
1,441
|
1,454
|
Current portion
|
30
|
10
|
Total carrying
amount
|
1,471
|
1,464
|
Fair value adjustment and measurements at
amortized cost
|
(171)
|
(164)
|
Total nominal
repayment amount (*)
|
1,300
|
1,300
|
(*) The repayment on maturity will take place
upon delivery of Telecom Italia S.p.A. ordinary shares.
The nominal repayment amount of the bonds
and convertible bonds totals 24,273 million euros, down 612 million euros
compared to December 31, 2013 (24,885 million euros) as a result of
the new issues, repayments and buybacks in the first quarter of 2014.
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 9
Financial
liabilities (non-current and current)
|
82
|
The following
table lists the bonds issued by companies of the Telecom Italia Group, by
issuing company, expressed at the nominal repayment amount, net of bond
repurchases, and also at market value:
Currency
|
Amount
(millions)
|
Nominal repayment
amount
(millions of euros)
|
Coupon
|
Issue date
|
Maturity date
|
Issue price (%)
|
Market price at
3/31/14
(%)
|
Market value at
3/31/14
(millions of euros)
|
|
|
|
|
|
|
Bonds
issued by Telecom Italia S.p.A.
|
EURO
|
500.7
|
500.7
|
4.750%
|
5/19/06
|
5/19/14
|
99.156
|
100.521
|
503
|
EURO
|
577.7
|
577.7
|
4.625%
|
6/15/12
|
6/15/15
|
99.685
|
104.085
|
601
|
EURO
|
120
|
120
|
3 month Euribor + 0.66%
|
11/23/04
|
11/23/15
|
100
|
97.871
|
117
|
GBP
|
500
|
603.7
|
5.625%
|
6/29/05
|
12/29/15
|
99.878
|
105.297
|
636
|
EURO
|
771.6
|
771.6
|
5.125%
|
1/25/11
|
1/25/16
|
99.686
|
106.219
|
820
|
EURO
|
708
|
708
|
8.250%
|
3/19/09
|
3/21/16
|
99.740
|
112.445
|
796
|
EURO
|
400
|
400
|
3 month Euribor + 0.79%
|
6/7/07
|
6/7/16
|
100
|
98.870
|
395
|
EURO
|
1,000
|
1,000
|
7.000%
|
10/20/11
|
1/20/17
|
(a) 100.185
|
112.672
|
1,127
|
EURO
|
1,000
|
1,000
|
4.500%
|
9/20/12
|
9/20/17
|
99.693
|
106.798
|
1,068
|
GBP
|
750
|
905.6
|
7.375%
|
5/26/09
|
12/15/17
|
99.608
|
111.815
|
1,013
|
EURO
|
750
|
750
|
4.750%
|
5/25/11
|
5/25/18
|
99.889
|
106.993
|
802
|
EURO
|
750
|
750
|
6.125%
|
6/15/12
|
12/14/18
|
99.737
|
112.878
|
847
|
EURO
|
1,250
|
1,250
|
5.375%
|
1/29/04
|
1/29/19
|
99.070
|
109.272
|
1,366
|
GBP
|
850
|
1,026.3
|
6.375%
|
6/24/04
|
6/24/19
|
98.850
|
107.709
|
1,105
|
EURO
|
1,000
|
1,000
|
4.000%
|
12/21/12
|
1/21/20
|
99.184
|
102.360
|
1,024
|
EURO
|
1,000
|
1,000
|
4.875%
|
9/25/13
|
9/25/20
|
98.966
|
105.574
|
1,056
|
EURO
|
1,000
|
1,000
|
4.500%
|
1/23/14
|
1/25/21
|
99.447
|
103.129
|
1,031
|
EURO
|
(b) 196.1
|
196.1
|
6 month Euribor
(base 365)
|
1/1/02
|
1/1/22
|
100
|
100.000
|
196
|
EURO
|
1,250
|
1,250
|
5.250%
|
2/10/10
|
2/10/22
|
99.295
|
106.090
|
1,326
|
GBP
|
400
|
483.0
|
5.875%
|
5/19/06
|
5/19/23
|
99.622
|
101.828
|
492
|
EURO
|
670
|
670
|
5.250%
|
3/17/05
|
3/17/55
|
99.667
|
91.596
|
614
|
Subtotal
|
15,962.6
|
|
16,935
|
Bonds
issued by Telecom Italia Finance S.A. and guaranteed by Telecom Italia S.p.A.
|
EURO
|
(c)1.300
|
1,300
|
6.125%
|
11/15/13
|
11/15/16
|
100
|
118.493
|
1,540
|
JPY
|
20,000
|
140.4
|
3.550%
|
4/22/02
|
5/14/32
|
99.250
|
100.375
|
141
|
EURO
|
1,015
|
1,015
|
7.750%
|
1/24/03
|
1/24/33
|
(a) 109.646
|
121.270
|
1,231
|
Subtotal
|
2,455.4
|
|
2,912
|
Bonds
issued by Telecom Italia Capital S.A. and guaranteed by Telecom Italia S.p.A.
|
USD
|
(d)779.5
|
565.3
|
6.175%
|
6/18/09
|
6/18/14
|
100
|
101.023
|
571
|
USD
|
(d)528.3
|
383.2
|
4.950%
|
10/6/04
|
9/30/14
|
99.651
|
101.808
|
390
|
USD
|
(d)765.2
|
555.0
|
5.250%
|
9/28/05
|
10/1/15
|
99.370
|
105.052
|
583
|
USD
|
1,000
|
725.3
|
6.999%
|
6/4/08
|
6/4/18
|
100
|
113.625
|
824
|
USD
|
1,000
|
725.3
|
7.175%
|
6/18/09
|
6/18/19
|
100
|
114.473
|
830
|
USD
|
1,000
|
725.3
|
6.375%
|
10/29/03
|
11/15/33
|
99.558
|
98.791
|
716
|
USD
|
1,000
|
725.3
|
6.000%
|
10/6/04
|
9/30/34
|
99.081
|
94.180
|
683
|
USD
|
1,000
|
725.3
|
7.200%
|
7/18/06
|
7/18/36
|
99.440
|
102.373
|
742
|
USD
|
1,000
|
725.3
|
7.721%
|
6/4/08
|
6/4/38
|
100
|
106.809
|
775
|
Subtotal
|
5,855.1
|
|
6,114
|
Total
|
24,273.1
|
|
25,961
|
(a) Weighted average issue price for bonds
issued with more than one tranche.
(b) Reserved for employees.
(c) Mandatory Convertible Bond.
(d) Net of the securities bought back by
Telecom Italia S.p.A. on June 3, 2013.
The regulations and/or Offering Circulars
relating to the bonds of the Telecom Italia Group described above are available
on the corporate website www.telecomitalia.com.
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 9
Financial
liabilities (non-current and current)
|
83
|
The following
table lists the changes in bonds during the first quarter of 2014:
(millions of original currency)
|
Currency
|
Amount
|
Issue date
|
Telecom Italia
S.p.A. 1,000 million euros 4.500% maturing 1/25/2021
|
EURO
|
1,000
|
1/23/2014
|
(millions of original currency)
|
Currency
|
Amount
|
Repayment date
|
Telecom
Italia S.p.A. 284 million euros 7.875% (1)
|
EURO
|
284
|
1/22/2014
|
|
Telecom
Italia S.p.A. 750 million euros 7.750% (2)
|
EURO
|
750
|
3/3/2014
|
|
|
|
|
|
|
|
|
|
(1) Net of buybacks by the Company
for 216 million euros during 2012.
(2) Telecom Italia decided to use
the right to early redemption as a result of a change in methodology by a
rating agency that results in a reduction of the equity content initially
assigned to the instrument, pursuant to Condition 6.5 (Early Redemption following
a Rating Methodology Event) of the securities regulations.
On March 18, 2014 Telecom Italia S.p.A.
successfully concluded the buyback offer on four bond issues of Telecom Italia
S.p.A. maturing between May 2014 and March 2016, buying back a total nominal
amount of 599 million euros.
Details of the bond issues bought back
are provided below:
Bond Name
|
Outstanding nominal amount prior to the purchase
offer
(euros)
|
Repurchased nominal amount
(euros)
|
Buyback price
|
|
|
|
|
Telecom Italia S.p.A.
750 million euros, maturing May 2014,
coupon 4.75%
|
556,800,000
|
56,150,000
|
100.700%
|
Telecom
Italia S.p.A.
750 million euros, maturing June 2015, coupon 4.625%
|
750,000,000
|
172,299,000
|
104.370%
|
Telecom Italia S.p.A.
1 billion euros, maturing January 2016, coupon 5.125%
|
1,000,000,000
|
228,450,000
|
106.587%
|
Telecom Italia S.p.A.
850 million euros, maturing March 2016, coupon 8.25%
|
850,000,000
|
142,020,000
|
112.913%
|
Medium/long-term amounts due to banks of 4,092 million euros (4,087 million euros at December 31,
2013) increased by 5 million euros. Short-term amounts due to banks totaled
2,489 million euros, decreasing 301 million euros
(2,790 million euros at December 31, 2013). Short-term amounts due to
banks included 2,329 million euros for the current portion of medium/long-term
amounts due to banks.
Medium/long-term other financial payables amounted to 355 million euros (356 million euros at December 31,
2013). They included 182 million euros of payable due from Telecom Italia
S.p.A. to the Ministry of Economic Development for the purchase of the rights
of use for the 800, 1800 and 2600 MHz frequencies due in October 2016, and 141
million euros for Telecom Italia Finance S.A.’s loan of 20,000 million Japanese
yen expiring in 2029. Short-term other financial payables amounted to 374
million euros (400 million euros at December 31, 2013), down 26 million euros.
They included 114 million euros of the current portion of the medium/long-term
other financial payables, of which 97 million euros
relating to the payable due from Telecom Italia S.p.A. for the purchase of the rights
of use for the 800, 1800 and 2600 MHz frequencies.
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 9
Financial
liabilities (non-current and current)
|
84
|
Finance lease
liabilities (medium/long-term)totaled 1,069 million euros (1,100 million euros at
December 31, 2013) and mainly related to building sale and leaseback
transactions recorded in accordance with the financial method established by
IAS 17. Short-term finance lease liabilities amounted to 187 million euros
(193 million euros at December 31, 2013).
Hedging derivatives relating to items classified as non-current liabilities of a
financial nature amounted to 2,144 million euros (2,026 million euros at
December 31, 2013). Hedging derivatives relating to items classified as current
liabilities of a financial nature totaled 221 million euros (207 million euros
at December 31, 2013).
Non-hedging
derivatives relating to items classified as
non-current liabilities of a financial nature amounted to 95 million euros
(zero million euros at December 31, 2013). 92 million euros of the increase
derives from the measurement at March 31, 2014 of the embedded option of the
mandatory convertible bond issued by the Telecom Italia Finance S.A. for an
amount of 1.3 billion euros (“Guaranteed Subordinated Mandatory Convertible
Bonds due 2016 convertible into ordinary shares of Telecom Italia S.p.A.”). At
December 31, 2013, the value of the option was a positive 63 million euros, and
thus it was classified as “Non-current financial assets – Non-hedging
derivatives”. That measurement, which resulted in the recognition in the income
statement of an expense of 155 million euros, had no impact in terms of cash
flows because, on maturity of the bonds, the residual value of the embedded
option will be reversed and recorded as a contra-entry to equity reserves.
Note that the option embedded in the
financial instrument was recognized in the accounts separately from the related
liability (“payable”).
Non-hedging derivatives relating to items
classified as current liabilities of a financial nature amounted to 8 million
euros (16 million euros at December 31, 2013). These refer to the measurement
of derivatives which, although put into place for hedging purposes, do not
possess the formal requisites to be considered as such under IFRS.
Covenants,
negative pledges and other conditions of contract existing at March 31, 2014
The bonds issued by the Telecom Italia
Group do not contain financial covenants (e.g. ratios such as Debt/EBITDA,
EBITDA/Interest etc.) or clauses that would force the early redemption of the
bonds in relation to events other than the insolvency of the Telecom Italia
Group. Furthermore, the repayment of the bonds and the payment of interest are
not covered by specific guarantees nor are there commitments provided relative
to the assumption of future guarantees, except for the full and unconditional
guarantees provided by Telecom Italia S.p.A. for the bonds issued by
Telecom Italia Finance S.A. and Telecom Italia Capital S.A.
Since these bonds have been placed
principally with institutional investors in major world capital markets
(Euromarket and the U.S.A.), the terms which regulate the bonds are in line
with market practice for similar transactions effected on these same markets.
Consequently, for example, there are commitments not to use the company’s
assets as collateral for loans (“negative pledges”).
With reference to
the loans received by Telecom Italia S.p.A. (“Telecom Italia”) from the
European Investment Bank (“EIB”), following the downgrade by Moody’s of Telecom
Italia to Ba1 on October 8, 2013 and the downgrade by Standard & Poor’s to
BB+ on November 14, 2013, an agreement with the Bank was signed on March 25,
2014 which resulted in the following: (i) on the loans maturing in 2018 and
2019 totaling 600 million euros, a reduction in the cost of funding from the
Bank in exchange for Telecom Italia setting up new guarantees - given by banks
and parties approved by the EIB - applying the related charges; (ii) on the 200
million euros in loans backed by SACE, no increases in costs were requested;
and (iii) on the remaining loans, totaling 1,700 million euros, an increase in
costs. Furthermore, a new clause was added to loans of 300 million euros with
the direct risk of Telecom Italia S.p.A., maturing in 2017, stating that if
Telecom Italia's rating from at least two rating agencies drops below BB+/Ba1
and the residual life of the loan exceeds one year, the Company must set up
additional guarantees in favor of the EIB.
Telecom Italia Group Condensed
Consolidated Financial
Statements at March 31, 2014
|
Note 9
Financial liabilities (non-current
and current)
|
85
|
The estimated impacts of the new agreement with the EIB have been
quantified overall as an increase in average annual finance expenses of
approximately 7.5 million euros.
After the
agreement is signed and the new guarantees requested are set up, the amount of
the loan, totaling 2,500 million euros, will be composed of 500 million euros
at direct risk and 2,000 million euros secured.
With reference to the EIB loans not
secured by bank guarantees for an nominal amount of 1,100 million euros (out of
a total nominal amount of 2,500 million euros at March 31, 2014), the following
covenants are applied:
• in
the event the company becomes the target of a merger, demerger or contribution
of a business segment outside the Group, or sells, disposes or transfers assets
or business segments (except in certain cases, expressly provided for), it shall
immediately inform the EIB which shall have the right to ask for guarantees to
be provided or changes to be made to the loan contract, or, only for certain
loan contracts, the EIB shall have the option to demand the immediate repayment
of the loan (should the merger, demerger or contribution of a business segment
outside the Group compromise the Project execution or cause a prejudice to EIB
in its capacity as creditor);
• “Inclusion
clause” provided for in the 100 million euros loan of August 5, 2011 and the
300 million euros loan of February 7, 2013: where there are more restrictive
clauses (e.g. cross default clauses, financial covenants, commitments
restricting the sale of goods) conceded by the Company in new loan contracts,
the EIB shall have the right to ask for guarantees to be set up or changes to
be made to the loan contract in order to obtain the equivalent clause in its
favor. The provision in question does not apply to subsidized loans until the
remaining total amount of principal is above 500 million euros;
• “Network
Event” contemplated in the 300 million euros financing and in the 100 million
euros financing guaranteed by SACE dated both February 7, 2013: against the
disposal of the entire fixed network or of a substantial part of it (in any
case more than half in quantitative terms) in favor of third parties or in case
of disposal of the controlling stake of the company in which the network or a
substantial part of it has previously been transferred, Telecom Italia shall
immediately inform EIB, which shall have the option of requiring the provision
of guarantees or amendment of the loan contract or an alternative solution.
The syndicated bank credit lines of
Telecom Italia S.p.A. do not contain financial covenants (e.g. ratios such as
Debt/EBITDA, EBITDA/Interests, etc.) which would oblige the Company to repay
the outstanding loan if the covenants are not observed. Mechanisms are
established for adjusting the cost of funding in relation to Telecom Italia's
credit rating.
The syndicated credit lines contain the
usual other types of covenants, including the commitment not to use the
Company’s assets as collateral for loans (negative pledges), the commitment not
to change the business purpose or sell the assets of the Company unless
specific conditions exist (e.g. the sale takes place at fair market value).
Covenants with basically the same content are also found in the export credit
loan agreement.
In a series of agreements in which
Telecom Italia is a party, communication must be provided in case of a change
in control. With regard to financing relationships:
· Multi-currency
revolving credit facility (“MRCF”) (8,000,000,000 euros) due August 1, 2014.
The agreement was signed between Telecom Italia and a syndicate of banks on
August 1, 2005 and subsequently modified.
The provisions regarding
change of control are similar to those in the syndicated Forward Start
Facilities that will enter into force upon expiry of the MRCF on August 1,
2014, and specifically:
-
Revolving Credit Facility (“RCF 2017”) signed on May 24,
2012 for 4 billion euros and expiring on May 24, 2017; and
-
Revolving Credit Facility (“RCF 2018”) signed on March 25,
2013 for 3 billion euros and expiring on March 26, 2018.
In the event of a change in
control, Telecom Italia shall inform the agent within five business days and
the agent, on behalf of the lending banks, shall negotiate, in good faith, how
to continue the relationship. None of the parties shall be obliged to continue
such negotiations beyond the term of 30 days, at the
end of which, in the absence of an agreement (a) with 2/3 of the Lenders of the
MRCF, the facility will cease to be effective and Telecom Italia will be
required to repay any sum disbursed to it (currently equal to 1,500,000,000
euros) or (b) with a single bank in the RCF 2017 or RCF 2018, the bank with
which an agreement is not reached may request repayment of the amount disbursed
and elimination of the amount relating to its commitment. Conventionally, no
change of control is held to exist in the event control, pursuant to art. 2359
of the Italian Civil Code, is acquired (i) by shareholders who at the date of
signing the agreement held, directly or indirectly, more than 13% of the voting
rights in the shareholders’ meeting, or (ii) by the investors (Telefónica S.A.,
Assicurazioni Generali S.p.A., Intesa Sanpaolo S.p.A. and Mediobanca
S.p.A.) which had signed a shareholders’ agreement on April 28, 2007 regarding
the Telecom Italia shares, or (iii) by a combination of parties belonging to
the two categories;
Telecom Italia Group Condensed
Consolidated Financial
Statements at March 31, 2014
|
Note 9
Financial liabilities (non-current
and current)
|
86
|
· Bonds:
– fixed rate guaranteed subordinated equity-linked mandatory
convertible bonds, convertible into Telecom Italia S.p.A.ordinary shares,
issued by Telecom Italia Finance S.A. (the “Issuer”) and guaranteed by Telecom
Italia S.p.A. (the “Guarantor”). The trust deed established that if there is a
change of control, the Issuer must provide immediate notification of this to
the Trustee and the bondholders, and the bondholders will have the right to
convert their bonds into ordinary shares of the guarantor within the following
60 days. Acquisition of control is not considered to have taken place if the
control is acquired (i) by shareholders of the Guarantor who at the date of
signature of the agreement held, directly or indirectly, more than 13% of the
voting rights in shareholders' meetings of the Guarantor, or (ii) of the
parties to the Telco shareholders' agreement dated February 29, 2012 and
amended on September 24, and November 12, 2013, or (iii) by a combination of
parties belonging to the two categories;
– the regulations covering the bonds issued under the EMTN Programme
by both Olivetti and Telecom Italia and bonds denominated in U.S. dollars
typically provide that, in the event of mergers or transfer of all or
substantially all of the assets of the issuing company or of the guarantor, the
incorporating or transferee company shall assume all of the obligations of the
merged or transferor company. Non-fulfillment of the obligation, for which a
solution is not found, is an event of default;
· Contracts
with the European Investment Bank (EIB). The total nominal amount is 2.5
billion euros:
– The contracts signed by Telecom Italia with the EIB, for an amount
of 1.8 billion euros, carry the obligation of promptly informing the bank about
changes regarding the bylaws or the allocation of share capital among the
shareholders which can bring about a change in control. Failure to communicate
this information to the bank shall result in the termination of the contract.
The contract shall also be terminated when a shareholder, which, at the date of
signing the contract does not hold at least 2% of the share capital, comes to
hold more than 50% of the voting rights in the ordinary shareholders’ meeting
or, in any case, a number of shares such that it represents more than 50% of the
share capital. Whenever, in the bank’s reasonable opinion, this fact could
cause a detriment to the bank or could compromise the execution of the loan
project, the bank has the right to ask Telecom Italia to provide guarantees or
modify the contract or find an alternative solution. Should Telecom Italia not
comply with the requests of EIB, the bank has the right to terminate the
contract;
– the contracts signed by Telecom Italia with the EIBin 2011 and in
2013, for an amount of 600 million euros, carry the obligation of promptly
informing the bank about changes involving its bylaws or shareholder structure.
Failure to communicate this information to the bank shall result in the
termination of the contract. With regard to the contracts in question, a change
of control is generated if a subject or group of subjects acting in concert
acquires control of Telecom Italia, or of the entity that, directly or
indirectly, controls Telecom Italia. No change of control is held to exist
in the event control is acquired, directly or indirectly (i) by any shareholder
of Telecom Italia that at the date of the contract holds, directly or
indirectly, at least 13% of the voting rights in the shareholders’ meeting, or
(ii) by the investors Telefónica S.A., Assicurazioni Generali S.p.A., Intesa
Sanpaolo S.p.A. or Mediobanca S.p.A. or their subsidiaries. Under the
assumption that there is a change in control, the bank has the right to ask for
the early repayment of the loan;
– the three contracts covered by guarantees, signed on September 26,
2011, for a total amount of 200 million euros and the agreements backed by a
SACE guarantee concluded on February 7, 2013 for an
amount of 100 million euros, contain an "inclusion clause" according
to which in the event Telecom Italia commits to uphold in other loan contracts
financial covenants which are not present or are more stringent than those
granted to the EIB, then the EIB will have the right to request the providing
of guarantees or the modification of the loan contract in order to envisage an
equivalent provision in favor of the EIB. The provision in question does not
apply to subsidized loans until the remaining total amount of principal is
above 500 million euros;
Telecom Italia Group Condensed
Consolidated Financial Statements
at March 31, 2014
|
Note 9
Financial liabilities (non-current and current)
|
87
|
·
Loan contracts in general: the outstanding loans generally
contain a commitment by Telecom Italia – whose breach is an Event of Default –
not to implement mergers, demergers or transfer of business, involving entities
outside the Group. Such Event of Default may entail, upon request of the
Lender, the early redemptionof the drawn amounts and/or the annulment of the
undrawn commitment amounts;
· Senior
Secured Syndicated Facility. The contract, which was signed in October 2011
by BBVA Banco Francés and Tierra Argentea S.A. (a wholly-owned subsidiary of
the Telecom Italia Group) for a facility of 312,464,000 Argentine pesos,
provided for the repayment of the loan in 2016. As a result of a First Waiver
& Prepayment Agreement dated March 6, 2013, a Second Prepayment and Waiver
Agreement dated January 15, 2014, a Third Prepayment and Waiver Agreement dated
February 28, 2014 and a Final Prepayment and Waiver Agreement dated March 31,
2014, the loan was fully repaid on March 31, 2014 and there are no guarantees
or contractual covenants of any type bearing on the Telecom Italia Group.
Finally, in the documentation of the
loans granted to certain companies of the Tim Brasil group, the companies must
generally respect certain financial ratios (e.g. capitalization ratios, ratios
for servicing debt and debt ratios) as well as the usual other covenants, under
pain of a request for the early repayment of the loan.
Lastly, at March 31, 2014, no covenant,
negative pledge clause, or other clause relating to the aforementioned debt
position had in any way been breached or infringed.
Revolving Credit Facility
The following table shows the composition
and the draw down of the committed credit lines available at March 31, 2014:
(billions of euros)
|
3/31/2014
|
12/31/2013
|
|
Agreed
|
Drawn down
|
Agreed
|
Drawn down
|
|
|
|
|
|
Revolving Credit Facility – expiring August
2014
|
8.0
|
1.5
|
8.0
|
1.5
|
Total
|
8.0
|
1.5
|
8.0
|
1.5
|
On May 24, 2012, Telecom Italia entered
into a Forward Start Facility which extended the Revolving Credit Facility of 8
billion euros expiring August 2014 (“RCF 2014”) by 4 billion euros. The new
facility will come into effect as of August 2014 (or at an earlier date should
Telecom Italia extinguish its commitments under the current RCF 2014 in
advance) and expire in May 2017.
It should also be recalled that on March
25, 2013, Telecom Italia extended the RCF 2014 of 3 billion euros, by means of
another Revolving Credit Facility which will come into effect as of August 2014
(or at an earlier date should Telecom Italia extinguish its commitments under
the current RCF 2014 in advance) and will expire in March 2018.
Telecom Italia also has a bilateral
stand-by credit line expiring August 3, 2016 for 100 million euros from
Banca Regionale Europea, drawn down for the full amount.
Telecom Italia Group Condensed
Consolidated Financial Statements
at March 31, 2014
|
Note 9
Financial liabilities (non-current and current)
|
88
|
Telecom Italia Rating at March 31, 2014
At March 31, 2014, the three rating
agencies — Standard & Poor’s, Moody’s and Fitch Ratings — rated Telecom
Italia as follows:
|
Rating
|
Outlook
|
|
|
|
STANDARD & POOR’S
|
BB+
|
Negative
|
MOODY’S
|
Ba1
|
Negative
|
FITCH RATINGS
|
BBB -
|
Negative
|
Telecom Italia Group Condensed
Consolidated Financial
Statements at March 31, 2014
|
Note 9
Financial liabilities (non-current
and current)
|
89
|
Note
10
Net financial debt
As required by Consob Communication DEM/6064293
of July 28, 2006, the following table presents the net financial debt at March
31, 2014 and December 31, 2013, calculated in accordance with the criteria
indicated in the “CESR Recommendations for the Consistent Implementation of
Commission Regulation (EC) No. 809/2004 implementing the Prospectus Directive,”
issued by the Committee of European Securities Regulators on February 10, 2005
(now the European Securities & Markets Authority — ESMA), and adopted by
Consob.
For the purpose of determining such
figure, the amount of financial liabilities has been adjusted by the effect of
the relative hedging derivatives recorded in assets and the receivables arising
from financial subleasing.
This table also shows the reconciliation
of net financial debt determined according to the criteria indicated by ESMA
and net financial debt calculated according to the criteria of the Telecom
Italia Group and presented in the Report on Operations.
(millions of euros)
|
|
3/31/2014
|
12/31/2013
|
|
|
|
|
Non-current financial liabilities
|
|
31,040
|
31,084
|
Current financial liabilities
|
|
5,182
|
6,119
|
Financial liabilities directly associated
with Discontinued operations/Non-current assets held for sale
|
|
27
|
27
|
Total Gross financial debt
|
(a)
|
36,249
|
37,230
|
Non-current financial assets (°)
|
|
|
|
Non-current
financial receivables for lease contract
|
|
(50)
|
(58)
|
Non-current
hedging derivatives
|
|
(1,188)
|
(1,018)
|
|
(b)
|
(1,238)
|
(1,076)
|
Current financial assets
|
|
|
|
Securities
other than investments
|
|
(1,292)
|
(1,348)
|
Financial
receivables and other current financial assets
|
|
(354)
|
(283)
|
Cash and cash
equivalents
|
|
(3,945)
|
(5,744)
|
Financial
assets relating to Discontinued operations/Non-current assets held for sale
|
|
(508)
|
(657)
|
|
(c)
|
(6,099)
|
(8,032)
|
Net financial debt as per Consob
communication DEM/6064293/2006
|
(d=a+b+c)
|
28,912
|
28,122
|
Non-current financial assets (°)
|
|
|
|
Securities
other than investments
|
|
(6)
|
(6)
|
Other
financial receivables and other non-current financial assets
|
|
(96)
|
(174)
|
|
(e)
|
(102)
|
(180)
|
Net financial debt(*)
|
(f=d+e)
|
28,810
|
27,942
|
Reversal of
fair value measurement of derivatives and related financial
assets/liabilities
|
(g)
|
(1,281)
|
(1,135)
|
Adjusted net financial debt
|
(f+g)
|
27,529
|
26,807
|
(°) At March 31, 2014 and at December 31,
2013, “Non-current financial assets” (b+e) amounted to 1,340 million euros and
1,256 million euros, respectively.
(*) As regards the effects of related party
transactions on net financial debt, reference should be made to the specific
table included in the Note “Related party transactions “.
Telecom Italia Group Condensed
Consolidated Financial Statements
at March 31, 2014
|
Note 9
Financial liabilities (non-current and current)
|
90
|
Note 11
Supplementary disclosures on financial instruments
Measurement at fair value
The measurement at fair value of the financial instruments of the Group is classified according to the three levels set out in IFRS 7. In particular, the fair value hierarchy introduces three levels of input:
• Level 1: quoted prices in active market;
• Level 2: prices calculated using observable market inputs;
• Level 3: prices calculated using inputs that are not based on observable market data.
The tables below provide some additional information on the financial instruments, including the table relating to the fair value hierarchy level for each class of financial asset/liability at March 31, 2014 (excluding Discontinued operations/Non-current assets held for sale and Liabilities directly associated with Discontinued operations/Non-current assets held for sale).
Key for IAS 39 categories
|
|
Acronym |
|
|
|
Loans and Receivables |
|
LaR |
Financial assets Held-to-Maturity |
|
HtM |
Available-for-Sale financial assets |
|
AfS |
Financial Assets/Liabilities Held for Trading |
|
FAHfT/ FLHfT |
Financial Liabilities at Amortized Cost |
|
FLAC |
Hedging Derivatives |
|
HD |
Not applicable |
|
n.a. |
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Note 9
Financial liabilities (non-current and current) |
91 |
Fair value hierarchy
level for each class of financial asset/liability at 3/31/2014
|
|
|
|
|
Hierarchy Levels
|
(millions of euros)
|
|
IAS 39 Categories
|
note
|
Carrying amount in financial statements
at 3/31/2014
|
Level 1 (*)
|
Level 2 (*)
|
Level 3 (*)
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
Other investments
|
|
AfS
|
|
46
|
3
|
17
|
|
Securities, financial receivables and
other non-current financial assets
|
|
|
|
|
|
|
|
of which securities
|
|
AfS
|
|
6
|
6
|
|
|
of which hedging derivatives
|
|
HD
|
|
1,188
|
|
1,188
|
|
of which non-hedging derivatives
|
|
FAHfT
|
|
61
|
|
61
|
|
|
(a)
|
|
|
1,301
|
9
|
1,266
|
|
Current assets
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
of which available-for-sale financial assets
|
|
AfS
|
|
1,292
|
1,292
|
|
|
Financial receivables and other current
financial assets
|
|
|
|
|
|
|
|
of which hedging derivatives
|
|
HD
|
|
241
|
|
241
|
|
of which non-hedging derivatives
|
|
FAHfT
|
|
10
|
|
10
|
|
|
(b)
|
|
|
1,543
|
1,292
|
251
|
|
Total
|
(a+b)
|
|
|
2,844
|
1,301
|
1,517
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
of which hedging derivatives
|
|
HD
|
9)
|
2,144
|
|
2,144
|
|
of which non-hedging derivatives
|
|
FLHfT
|
9)
|
95
|
|
3
|
92
|
|
(c)
|
|
|
2,239
|
|
2,147
|
92
|
Current liabilities
|
|
|
|
|
|
|
|
of which hedging derivatives
|
|
HD
|
9)
|
221
|
|
221
|
|
of which non-hedging derivatives
|
|
FLHfT
|
9)
|
8
|
|
8
|
|
|
(d)
|
|
|
229
|
|
229
|
|
Total
|
(c+d)
|
|
|
2,468
|
|
2,376
|
92
|
(*)Level 1: quoted prices in active markets.
Level 2: prices calculated using
observable market inputs.
Level 3: prices calculated using inputs
that are not based on observable market data.
Fair value
measurements with unobservable inputs
The accounting of “Guaranteed
Subordinated Mandatory Convertible Bonds due 2016, convertible into ordinary
shares of Telecom Italia S.p.A.”, issued by the subsidiary Telecom Italia
Finance S.A. for a total of 1.3 billion euros, entailed the separate
recognition in accounts of the option embedded in the financial instruments,
distinctly from the debt liability itself.
The carrying amount of the embedded
option was measured as the net carrying amount of i) the long put option, with
an exercise price of 0.6801 euros at the maximum conversion rate; and ii) the
short call option, with an exercise price of 0.8331 euros at the minimum
conversion rate. The call and put options were measured at fair value using the
Black & Scholes model for pricing stock options. The model uses the
following inputs:
• the
risk-free interest rate for comparable maturities;
• the
reference price for Telecom Italia S.p.A. ordinary shares;
• the
exercise price;
Telecom
Italia Group Condensed
Consolidated
Financial Statements at March 31, 2014
|
Note 10
Net
financial debt
|
92
|
•
the dividend expected to be paid on Telecom
Italia S.p.A. ordinary shares over the life of the option;
• the
volatility of Telecom Italia S.p.A. ordinary shares;
• the
duration of the option.
Specifically,
volatility should be considered an unobservable input due to the lack of market
data (stock exchange listing of the bond option) for a time horizon equal to
the duration of the option. The figure is, therefore, an assumption based on
the volatility implied by the price of the financial instrument, as negotiated
at the issue stage, and market volatility for the nearest time horizon.
The following table shows the impact on
the income statement of that valuation.
(millions of euros)
|
3/31/2014
|
|
|
Asset value at December 31, 2013
|
63
|
Transfers to/from Level 3
|
-
|
Profit (loss) recognized in the Separate
Consolidated Income Statement
|
(155)
|
Profit (loss) recognized in other
components of the Consolidated Statements of Comprehensive Income
|
-
|
Asset
value at 3/31/2014
|
(92)
|
The
loss resulting from fair value adjustment at March 31, 2014 was posted under
finance expenses.
The price of an
option is sensitive to its volatility, in that the higher the volatility, the higher
the price of the option. Reported below is a sensitivity analysis of the net
carrying amount of the embedded option in relation to a series of changes
expressed in percentage point terms of volatility.
(millions of euros)
Change in volatility of Telecom
Italia S.p.A. ordinary shares
|
-10 p.p.
|
-8 p.p.
|
-5 p.p.
|
+5 p.p.
|
+8 p.p.
|
+10 p.p.
|
Change in the net carrying amount
of the embedded option
|
-
|
-
|
-1
|
-
|
+1
|
+2
|
Net
carrying amount of the embedded option
|
(92)
|
(92)
|
(93)
|
(92)
|
(91)
|
(90)
|
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014
|
Note 11
Supplementary disclosures on financial
instruments
|
93
|
Note
12
Contingent liabilities, other information
The most significant arbitration cases
and legal or fiscal disputes in which Telecom Italia Group companies are
involved at March 31, 2014 are described below.
The Telecom Italia Group has posted
liabilities totalling 313 million euros for those disputes described below
where the risk of losing the case has been considered probable.
a) Significant disputes and pending legal
action
For the following disputes and pending
legal actions no significant facts have emerged with respect to what was
published in the 2013 Annual Report:
• Telecom
Italia Sparkle – Relations with I-Globe, Planetarium, Acumen, AccrueTelemedia
and Diadem: investigation by the Public Prosecutor’s Office of Rome
• International
tax and regulatory disputes
• Investigation
by the Public Prosecutor’s Office of Monza
• Administrative
offence charge pursuant to Legislative Decree 231/2001 for the so-called
Telecom Italia Security Affair.
Antitrust Case A428
At the conclusion of case A428, on May
10, 2013, the Italian antitrust authority - AGCM imposed two administrative
sanctions of 88,182,000 euros and 15,612,000 euros on Telecom Italia for abuse
of its dominant position. The AGCM concluded that the Company (i) hindered or
delayed activation of access services requested by OLOs through unjustified and
spurious refusals; and (ii) offered its access services to final customers at
economic and technical conditions that allegedly could not be matched by
competitors purchasing wholesale access services from Telecom Italia itself,
only in those geographic areas of Italy where disaggregated access services to
the local network are available, and hence where other operators can compete
more effectively with the Company.
Telecom Italia appealed this decision to
the Regional Administrative Court (TAR) for Lazio, applying for payment of the
fine to be suspended. In particular, it alleged infringement of its procedural
rights to defend itself in the proceedings, claimed that the organisational
structures challenged by AGCM and allegedly accounting for the abuse vis-à-vis
the OLOs in connection with the provisioning processes had been the subject of
specific rulings made by the AGCom, the circumstance that the comparative
examination of the internal/external provisioning processes had shown better
results for the OLOs than for the Telecom Italia retail department (hence the
lack of any form of inequality of treatment and/or opportunistic behaviour by
Telecom Italia), and (regarding alleged abuse (ii) described above) the
fact that the conduct was structurally unsuitable to reduce the margins of the
OLOs.
In December 2013, the TAR upheld the
application for payment of the fine to be suspended, scheduling a hearing for
the discussion of the merits for February 2014, subsequently postponed to March
2014.
On May8, 2014, the judgement of the
Lazio TAR was published, rejecting Telecom Italia’s appeal and confirming in
full the fines imposed in the original order challenged. Telecom Italia will
appeal this decision to the Council of State.
Finally, it should be noted that the
liabilities already allocated in the Consolidated Financial Statement as at
December 31, 2013 cover the full amount of the two fines imposed by the
Authority.
─ ● ─
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014
|
Note 11
Supplementary disclosures on financial
instruments
|
94
|
It
should be noted that for the disputes described below, on the basis of the
information available at the closing date of the present document and with
particular reference to the complexity of the proceedings, to their progress,
and to elements of uncertainty of a technical-trial nature, it was not possible
to make a reliable estimate of the size and/or times of possible payments, if
any. Moreover, in the case in which the disclosure of information relative to
the dispute could seriously jeopardise the position of Telecom Italia or its
subsidiaries, only the general nature of the dispute is described.
Of the disputes with the aforementioned
characteristics, no significant facts have emerged for those listed below with
respect to what was published in the 2013 Annual Report:
• Antitrust Case I761
• Dispute relative to "Adjustments on license fees" for the
years 1994-1998
• VODAFONE
• WIND
• Irregular sale of handsets to companies in San Marino -
Investigation by the Public Prosecutor’s Office of Forlì
• POSTE
• Brazil - Docas/JVCO Arbitration
• Brazil - JVCO Dispute
• Others - Telecom Argentina
• TELETU
Antitrust Case I757
On September 12, 2012, AGCM started an
investigation against Telecom Italia, Wind and Vodafone to ascertain the
existence of an agreement restrictive of competition aimed at excluding from
the market the new operator BIP Mobile S.r.l.
BIP Mobile, which intended to present
itself as the first “low cost” virtual operator, did not have its own sales
network, since it accesses the market using the so-called multibrand
distribution channel. According to the complaint it submitted to AGCM, the
company has been faced with cancellations by retailers that distribute mobile
telephony services of various operators, allegedly induced by pressures that
were supposedly “the fruit of a concerted strategy between Telecom Italia, Vodafone
and Wind.
On December 20, 2013, AGCM decided to
extend the investigation to examine the conduct of Telecom Italia and Wind in
terms of potential vertical restrictions in violation of article 101 of the
Treaty on the Functioning of the European Union arising from supplementary
commercial agreements signed by each of them with a number ofmultibrand dealers,as
they provide extra incentives to the dealer while reserving the right to
terminate the agreement if the dealer markets the products or services of
operators other than those already marketed at the time the agreement is
signed.
On April 9, 2014 Telecom Italia presented
a proposal of undertakings. AGCM, having assessed that the undertakings
presented did not appear to be manifestly groundless, published them on April 22,
2014 for the purposes of the so-called market tests; the third parties
concerned may submit any comments they have on the undertakings presented by
May 22, 2014.
The deadline for the completion of the
investigation is October 30, 2014.
FASTWEB
In April 2014 Fastweb and Telecom Italia
reached a technical-procedural agreement to waive the arbitration started by
Fastweb in January 2011 by virtue of which the competitor requested
compensation for presumed damages totalling 146 million euros incurred
following alleged non-compliance with the provisions contained in the contract
for the supply of the LLU service. The agreement reached did not define the
respective damages claimed inferred in arbitration, which will continue in the
proceedings already pending before the Milan Civil Court, described below. It
should be pointed out that in arbitration Fastweb complained that, in the
period from July 2008 to June 2010, Telecom Italia had refused, unlawfully, to
execute approximately 30,000 requests to migrate customers to the Fastweb
network. Telecom Italia filed an appearance, submitting a counterclaim.
In December
2013, Fastweb served a writ of summons at the Court of Milan with a claim for
damages arising from alleged improper conduct by Telecom Italia in issuing an
excessive number of refusals to supply wholesale access ("KO")
services in 2009-2012 and in making economic offers to business customers, in
areas open to LLU services, that could not be replicated by competitors because
of the alleged squeeze on discount margins ("margin squeeze"
practices). Based on the content of the Antitrust Authority's well-known
decision A428, Fastweb has quantified this claim to be in the order of 1,744
million euros. The first hearing is scheduled for the month of May 2014.
The Company filed an appearance
challenging the claims made by the other party.
EUTELIA and VOICEPLUS
In June 2009, Eutelia and Voiceplus asked
that alleged acts of abuse by Telecom Italia of its dominant position in the
premium services market (based on the public offer of services provided through
so-called Non Geographic Numbers) be investigated. The complainants quantified
their damages at a total of approximately 730 million euros.
The case follows a precautionary
procedure in which the Milan Appeal Court prohibited certain behaviours of the
Company relating to the management of some financial relations with Eutelia and
Voiceplus concerning the Non Geographic Numbers, for which Telecom Italia
managed the payments from the end customers, on behalf of such OLOs and in the
light of regulatory requirements.
After the ruling with which the Milan
Court of Appeal accepted Telecom Italia's objections, declaring that it was not
competent in this matter and referring the case to the Civil Court, Eutelia in
extraordinary administration and Voiceplus in liquidation resubmitted the
matter to the Milan Court. The first hearing took place in the month of March
2014. Telecom Italia filed an appearance challenging the claims of the other
parties.
TELEUNIT
With a writ issued in October 2009 before
the Milan Appeal Court, Teleunit asked for alleged acts of abuse by Telecom
Italia of its dominant position in the premium services market to be
investigated. The complainant quantified its damages at a total of
approximately 362 million euros. Telecom Italia filed an appearance, contesting
the claims of the other party.
After the ruling with which the Court of
Appeal declared that it was not competent in this matter and referred the case
to the Court, Teleunit reinstated the case before the Milan Court.
Greece – DELAN
During 2012, the company Carothers Ltd,
acting as the successor of Delan Cellular Services S.A.(Delan), was awarded by
the Judge of the first instance in Athens (Greece) damages totalling around 85
million euros, against Wind Hellas (the new corporate name of TIM Hellas, the
Greek subsidiary sold by the Telecom Italia Group in 2005); the judgement was
appealed by Wind Hellas and the relative case is currently pending before the
Court of Appeal in Athens.
Wind Hellas, in turn, summoned Telecom
Italia International to appear before an ICC Arbitration Tribunal, on the basis
of the indemnification obligations contained in the sales contract for the sale
of the shareholding. Wind Hellas sought a declaration of its right to be held
harmless for any possible negative outcome deriving from the ongoing appeal
proceedings. In August 2012, Telecom Italia International filed the answer to
the request for arbitration and counterclaim, requesting – among others –
compensation for damages as a result of breach of the arbitration clause
contained in the Share Purchase Agreement signed in 2005. In March 2013, Wind
Hellas filed the Statement of Claim and, subsequently, the parties made the
planned exchange of briefs within the terms set by the Arbitration Tribunal.
The hearing scheduled for the last week of February 2014 was postponed, with
the agreement of the parties, to a date to be confirmed.
Moreover Wind Hellas asked Telecom
Italia International to assume the defence of another ordinary legal dispute in
Greece, this too allegedly part of the obligations deriving from the contract
of sale.
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014
|
Note 12
Contingent liabilities, other information
|
96
|
Brazil -
Opportunity Arbitration
In late May 2012, Telecom Italia and
Telecom Italia International N.V. were served with an arbitration brought by
the Opportunity group, claiming restoration of damages allegedly suffered as a
consequence of the presumed breach of a certain settlement agreement signed in
2005. Based on claimant’s allegations, such damages would be related to matters
emerged in the framework of the criminal proceedings pending before the Court
of Milan regarding, among others, activities of former employees of the
Security Department of Telecom Italia.
In August 2013 the Opportunity group
filed a Statement of Claim, defining in detail its claims against Telecom
Italia and Telecom Italia International and, in particular, specifying the
facts cited and indicating the sources of proof, also in relation to
quantification of the damages. On March 26, 2014 Telecom Italia and Telecom
Italia International filed the Statement of Defense and Counterclaim rejecting
the arguments of Opportunity and challenging its claims; the defendants also
formulated a counterclaim for damages for breach of contract by Opportunity. The
preliminary phase of the arbitration is in progress. The hearing for the
pleading is scheduled for November 2014.
Mobile telephony - criminal proceedings
In March 2012 Telecom Italia was served
notice of the conclusion of the preliminary enquiries, which showed that the
Company was being investigated by the Public Prosecutor of Milan pursuant to
the Legislative Decree n. 231/2001, for the offences of handling stolen goods
(Art. 648 of the Criminal Code) and counterfeiting (Art. 491-bis of the
Criminal Code) committed, according to the alleged allegations, by fourteen
employees of the so-called “ethnic channel”, with the participation of a number
of dealers, for the purpose of obtaining undeserved commissions from Telecom
Italia.
The Company, as the injured party
damaged by such conduct, had brought two legal actions in 2008 and 2009 and had
proceeded to suspend the employees involved in the criminal proceedings
(suspension later followed by dismissal). It has also filed an initial statement
of defence, together with a technical report by its own expert, requesting that
the proceedings against it be suspended, and that charges of aggravated fraud
against the Company be brought against the other defendants. In December 2012,
the Public Prosecutor's Office filed a request for 89 defendants and the
Company itself to be committed for trial.
During the preliminary hearing, the
Company was admitted as civil party to the trial and, in November 2013, the
conclusions in the interest of the civil party were filed, reaffirming Telecom
Italia's total lack of involvement in the offences claimed.
At the end of the preliminary hearing,
which took place in March 2014, the Judge for the Preliminary Hearing committed
for trial all the defendants (including Telecom Italia) who did not ask for the
definition of their position with alternative procedures, on the grounds that
“the examination hearing is necessary”. The first evidentiary hearing is
scheduled for May 29, 2014.
***
With regard to the criminal proceedings
for the offence of "preventing the public supervisory authorities from
performing their functions” against a former Executive Director (Mr. Riccardo
Ruggiero) and two former managers related, in the charge, to the communication
to AGCom of a customer base deemed to have been altered both by false
extensions of 5,130,000 SIM cards topped up with 0.01 euros, and by activating
1,042,447 SIM cards deemed irregular and not topped up in the twelve months
after activation, in November 2013 the Preliminary Hearing Judge at the Court
of Rome dismissed the case following the transfer of the case from the Court of
Milan to the Court of Rome due to lack of jurisdiction.
The Public Prosecutor of Rome proposed to appeal to the
Court of Cassation against the previous judgement “that there is no case to
answer” and on May 6, 2014 the Court of Cassation declared this appeal
inadmissible.
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014
|
Note 12
Contingent liabilities, other information
|
97
|
Note 13
Segment reporting
a) Reporting by operating segment
As carried out in the consolidated financial statements for 2013, following the inclusion of Sofora – Telecom Argentina group under Discontinued operations/Non-current assets held for sale, the Argentina Business Unit is no longer shown.
Moreover, since the first quarter of 2014 the operations of the Olivetti group have been consolidated under the Domestic Business Unit. This different presentation reflects the commercial and business placement of the Olivetti group and the process of integrating its products and services offered by Telecom Italia in the domestic market. The disclosure by operating segment for the periods under comparison has been duly reclassified.
Segment reporting is based on the following operating segments:
• Domestic
• Brazil
• Media
• Other Operations
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Note 12
Contingent liabilities, other information |
98 |
Separate Consolidated Income Statements by Operating Segment
(millions of euros) |
Domestic |
Brazil |
Media |
Other Operations |
Adjustments and eliminations |
Consolidated Total |
|
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
Third-party revenues |
3,722 |
4,058 |
1,451 |
1,784 |
15 |
47 |
− |
− |
− |
− |
5,188 |
5,889 |
Intragroup revenues |
6 |
8 |
− |
2 |
− |
1 |
− |
− |
(6) |
(11) |
− |
− |
Revenues by operating segment |
3,728 |
4,066 |
1,451 |
1,786 |
15 |
48 |
− |
− |
(6) |
(11) |
5,188 |
5,889 |
Other income |
82 |
48 |
3 |
4 |
1 |
1 |
− |
− |
(2) |
1 |
84 |
54 |
Total operating revenues and other income |
3,810 |
4,114 |
1,454 |
1,790 |
16 |
49 |
− |
− |
(8) |
(10) |
5,272 |
5,943 |
Acquisition of goods and services |
(1,331) |
(1,411) |
(846) |
(1,109) |
(7) |
(45) |
(2) |
(1) |
7 |
9 |
(2,179) |
(2,557) |
Employee benefits expenses |
(688) |
(741) |
(84) |
(91) |
(2) |
(13) |
(1) |
(1) |
− |
1 |
(775) |
(845) |
of which: accruals to employee severance indemnities |
− |
− |
− |
− |
− |
− |
− |
− |
− |
− |
− |
− |
Other operating expenses |
(119) |
(149) |
(147) |
(174) |
(1) |
(3) |
− |
(1) |
− |
− |
(267) |
(327) |
of which: write-downs and expenses in connection with credit management and provision charges |
(60) |
(86) |
(41) |
(51) |
− |
(1) |
− |
− |
− |
− |
(101) |
(138) |
Change in inventories |
13 |
23 |
10 |
26 |
− |
2 |
− |
− |
− |
(1) |
23 |
50 |
Internally generated assets |
107 |
117 |
19 |
21 |
− |
− |
− |
− |
− |
− |
126 |
138 |
EBITDA |
1,792 |
1,953 |
406 |
463 |
6 |
(10) |
(3) |
(3) |
(1) |
(1) |
2,200 |
2,402 |
Depreciation and amortization |
(839) |
(886) |
(225) |
(254) |
(7) |
(10) |
− |
− |
1 |
1 |
(1,070) |
(1,149) |
Gains (losses) on disposals of non-current assets |
37 |
6 |
− |
− |
− |
− |
− |
− |
− |
− |
37 |
6 |
Impairment reversals (losses) on non-current assets |
− |
− |
− |
− |
− |
(105) |
− |
− |
− |
− |
− |
(105) |
EBIT |
990 |
1,073 |
181 |
209 |
(1) |
(125) |
(3) |
(3) |
− |
− |
1,167 |
1,154 |
Share of losses (profits) of associates and joint ventures accounted for using the equity method |
(5) |
− |
− |
- |
− |
- |
− |
- |
− |
− |
(5) |
− |
Other income (expenses) from investments |
11 |
− |
Finance income |
366 |
732 |
Finance expenses |
(1,051) |
(1,244) |
Profit (loss) before tax from continuing operations |
488 |
642 |
Income tax expense |
(254) |
(291) |
Profit (loss) from continuing operations |
234 |
351 |
Profit (loss) from Discontinued operations/Non-current assets held for sale |
133 |
97 |
Profit (loss) for the period |
367 |
448 |
Attributable to: |
|
|
Owners of the Parent |
222 |
364 |
Non-controlling interests |
145 |
84 |
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Note 12
Contingent liabilities, other information |
99 |
Revenues by Operating Segment
(millions of euros) |
Domestic |
Brazil |
Media |
Other Operations |
Adjustments and eliminations |
Consolidated Total |
|
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
Revenues from equipment sales - third party |
173 |
180 |
186 |
236 |
− |
− |
− |
− |
− |
− |
359 |
416 |
Revenues from equipment sales - intragroup |
− |
− |
− |
− |
− |
− |
− |
− |
− |
− |
− |
− |
Total revenues from equipment sales |
173 |
180 |
186 |
236 |
− |
− |
− |
− |
− |
− |
359 |
416 |
Revenues from services - third party |
3,548 |
3,886 |
1,265 |
1,548 |
15 |
47 |
− |
− |
− |
− |
4,828 |
5,481 |
Revenues from services - intragroup |
6 |
8 |
− |
2 |
− |
1 |
− |
− |
(6) |
(11) |
− |
− |
Total revenues from services |
3,554 |
3,894 |
1,265 |
1,550 |
15 |
48 |
− |
− |
(6) |
(11) |
4,828 |
5,481 |
Revenues on construction contracts - third party |
1 |
(8) |
− |
− |
− |
− |
− |
− |
− |
− |
1 |
(8) |
Revenues on construction contracts-intragroup |
− |
− |
− |
− |
− |
− |
− |
− |
− |
− |
− |
− |
Total revenues on construction contracts |
1 |
(8) |
− |
− |
− |
− |
− |
− |
− |
− |
1 |
(8) |
Total third-party revenues |
3,722 |
4,058 |
1,451 |
1,784 |
15 |
47 |
− |
− |
− |
− |
5,188 |
5,889 |
Total intragroup revenues |
6 |
8 |
− |
2 |
− |
1 |
− |
− |
(6) |
(11) |
− |
− |
Total revenues by operating segment |
3,728 |
4,066 |
1,451 |
1,786 |
15 |
48 |
− |
− |
(6) |
(11) |
5,188 |
5,889 |
Capital Expenditures by Operating Segment
(millions of euros) |
Domestic |
Brazil |
Media |
Other Operations |
Adjustments and eliminations |
Consolidated Total |
|
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
1st Quarter 2014 |
1st Quarter 2013 |
Purchase of intangible assets |
181 |
260 |
128 |
110 |
- |
7 |
- |
− |
− |
− |
309 |
377 |
Purchase of tangible assets |
312 |
319 |
61 |
68 |
2 |
2 |
- |
− |
− |
− |
375 |
389 |
Total capital expenditures |
493 |
579 |
189 |
178 |
2 |
9 |
− |
− |
− |
− |
684 |
766 |
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Note 13
Segment reporting |
100 |
Headcount by Operating Segment
(number)
|
Domestic
|
Brazil
|
Media
|
Other Operations
|
Consolidated Total
|
|
3/31/2014
|
12/31/2013
|
3/31/2014
|
12/31/2013
|
3/31/2014
|
12/31/2013
|
3/31/2014
|
12/31/2013
|
3/31/2014
|
12/31/2013
|
Headcount (*)
|
53,302
|
53,377
|
12,206
|
12,140
|
84
|
84
|
21
|
22
|
65,613
|
65,623
|
(*) The number of personnel at period-end
does not include the headcount relating to Discontinued operations/Non-current
assets held for sale.
Assets
and liabilities by operating segment
(millions of euros)
|
Domestic
|
Brazil
|
Media
|
Other Operations
|
Adjustments and eliminations
|
Consolidated Total
|
|
3/31/2014
|
12/31/2013
|
3/31/2014
|
12/31/2013
|
3/31/2014
|
12/31/2013
|
3/31/2014
|
12/31/2013
|
3/31/2014
|
12/31/2013
|
3/31/2014
|
12/31/2013
|
Non-current operating assets
|
44,584
|
44,878
|
6,159
|
5,971
|
202
|
207
|
7
|
7
|
(22)
|
(25)
|
50,930
|
51,038
|
Current operating assets
|
4,224
|
4,070
|
2,038
|
1,681
|
21
|
17
|
45
|
12
|
(28)
|
(26)
|
6,300
|
5,754
|
Total operating assets
|
48,808
|
48,948
|
8,197
|
7,652
|
223
|
224
|
52
|
19
|
(50)
|
(51)
|
57,230
|
56,792
|
Investments accounted for using the equity
method
|
34
|
64
|
-
|
−
|
-
|
−
|
-
|
−
|
1
|
1
|
35
|
65
|
Discontinued operations/Non-current assets held for
sale
|
3,008
|
3,528
|
Unallocated assets
|
8,009
|
9,835
|
Total
Assets
|
68,282
|
70,220
|
Total operating liabilities
|
7,937
|
8,532
|
2,074
|
2,423
|
43
|
36
|
15
|
23
|
(52)
|
(48)
|
10,017
|
10,966
|
Liabilities directly associated with Discontinued
operations/Non-current assets held for sale
|
1,281
|
1,561
|
Unallocated liabilities
|
36,603
|
37,507
|
Equity
|
20,381
|
20,186
|
Total
Equity and Liabilities
|
68,282
|
70,220
|
b)
Reporting by geographical area
|
|
Revenues
|
Non-current operating assets
|
(millions of euros)
|
|
Breakdown by location of operations
|
Breakdown by location of customers
|
Breakdown by location of operations
|
|
|
1st Quarter 2014
|
1st Quarter 2013
|
1st Quarter 2014
|
1st Quarter 2013
|
3/31/2014
|
12/31/2013
|
Italy
|
(a)
|
3,661
|
4,032
|
2,875
|
3,822
|
44,383
|
44,670
|
Outside Italy
|
(b)
|
1,527
|
1,857
|
2,313
|
2,067
|
6,547
|
6,368
|
Total
|
(a+b)
|
5,188
|
5,889
|
5,188
|
5,889
|
50,930
|
51,038
|
c)
Information about major customers
None of the Telecom Italia Group’s customers
exceeds 10% of consolidated revenues.
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014
|
Note 13
Segment reporting
|
101
|
Note 14
Related party transactions
The following tables show the figures relating to related party transactions and the impact of those amounts on the separate consolidated income statement, consolidated statement of financial position and consolidated statement of cash flows.
Transactions with related parties, when not dictated by specific laws, were conducted at arm’s length. The transactions were subject to an internal procedure (available for consultation on the Company’s website at the following address: www.telecomitalia.com, section Governance – channel governance system) which establishes procedures and time scales for verification and monitoring.
As in the consolidated financial statements for 2013, the Sofora - Telecom Argentina group is classified as discontinued operations. Therefore, the related figures are classified under "Discontinued operations/Non-current assets held for sale" and "Liabilities directly associated with Discontinued operations/Non-current assets held for sale" in the consolidated statement of financial position.
SEPARATE CONSOLIDATED INCOME STATEMENT LINE ITEMS — FIRST QUARTER 2014
(millions of euros) |
Total |
Related Parties |
|
|
Associates and joint ventures |
Companies controlled by associates and joint ventures |
Other related parties (*) |
Pension funds |
Key managers |
Total related parties |
Transactions of Discontinued Operations |
Total related parties net of Disc.Op. |
% of financial statement item |
|
(a) |
|
|
|
|
|
|
|
(b) |
(b/a) |
Revenues |
5,188 |
2 |
|
180 |
|
|
182 |
(41) |
141 |
2.7 |
Other income |
84 |
|
|
4 |
|
|
4 |
|
4 |
4.8 |
Acquisition of goods and services |
2,179 |
2 |
5 |
110 |
|
|
117 |
(24) |
93 |
4.3 |
Employee benefits expenses |
775 |
|
|
3 |
21 |
2 |
26 |
(2) |
24 |
3.1 |
Finance income |
366 |
|
|
15 |
|
|
15 |
|
15 |
4.1 |
Finance expenses |
1,051 |
2 |
|
17 |
|
|
19 |
|
19 |
1.8 |
Profit (loss) from Discontinued operations/Non-current assets held for sale |
133 |
|
(3) |
18 |
|
|
15 |
|
|
|
(*) Other related parties through directors, statutory auditors and key managers, and also as participants in shareholders' agreements pursuant to Article 122 of the Consolidated Law on Finance. |
SEPARATE CONSOLIDATED INCOME STATEMENT LINE ITEMS — 1ST QUARTER 2013
(millions of euros) |
Total |
Related Parties |
|
|
Associates and joint ventures |
Companies controlled by associates and joint ventures |
Other related parties (*) |
Pension funds |
Key managers |
Total related parties |
Transactions of Discontinued Operations |
Total related parties net of Disc.Op. |
% of financial statement item |
|
(a) |
|
|
|
|
|
|
|
(b) |
(b/a) |
Revenues |
5,889 |
3 |
|
228 |
|
|
231 |
(46) |
185 |
3.1 |
Other income |
54 |
|
|
|
|
|
|
|
|
|
Acquisition of goods and services |
2,557 |
2 |
6 |
167 |
|
|
175 |
(36) |
139 |
5.4 |
Employee benefits expenses |
845 |
|
|
|
21 |
5 |
26 |
|
26 |
3.1 |
Finance income |
732 |
|
|
48 |
|
|
48 |
|
48 |
6.6 |
Finance expenses |
1,244 |
4 |
|
34 |
|
|
38 |
|
38 |
3.1 |
Profit (loss) from Discontinued operations/Non-current assets held for sale |
97 |
|
(2) |
12 |
|
|
10 |
|
|
|
(*)Other related parties through directors, statutory auditors and key managers, and also as participants in shareholders' agreements pursuant to Article 122 of the Consolidated Law on Finance. |
|
|
|
|
|
|
|
|
|
|
|
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Note 13
Segment reporting |
102 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION LINE ITEMS AT 3/31/2014
(millions of euros) |
Total |
Related Parties |
|
|
Associates and joint ventures |
Companies controlled by associates and joint ventures |
Other related parties (*) |
Pension funds |
Total related parties |
Transactions of Discontinued Operations |
Total related parties net of Disc.Op. |
% of financial statement item |
|
(a) |
|
|
|
|
|
|
(b) |
(b/a) |
Net financial debt |
|
|
|
|
|
|
|
|
|
Non-current financial assets |
(1,340) |
|
(6) |
(142) |
|
(148) |
|
(148) |
11.0 |
Securities other than investments (current assets) |
(1,292) |
|
|
(41) |
|
(41) |
|
(41) |
3.2 |
Financial receivables and other current financial assets |
(354) |
|
|
(8) |
|
(8) |
|
(8) |
2.3 |
Cash and cash equivalents |
(3,945) |
|
|
(37) |
|
(37) |
|
(37) |
0.9 |
Current financial assets |
(5,591) |
|
|
(86) |
|
(86) |
|
(86) |
1.5 |
Discontinued operations/Non-current assets held for sale of a financial nature |
(508) |
|
|
|
|
|
|
|
|
Non-current financial liabilities |
31,040 |
48 |
|
175 |
|
223 |
|
223 |
0.7 |
Current financial liabilities |
5,182 |
63 |
|
282 |
|
345 |
|
345 |
6.7 |
Liabilities directly associated with Discontinued operations/Non-current assets held for sale of a financial nature |
27 |
|
|
|
|
|
|
|
|
Total net financial debt |
28,810 |
111 |
(6) |
229 |
|
334 |
|
334 |
1.2 |
Other statement of financial position line items |
|
|
|
|
|
|
|
|
|
Trade and miscellaneous receivables and other current assets |
5,921 |
4 |
1 |
205 |
|
210 |
(28) |
182 |
3.1 |
Discontinued operations/Non-current assets held for sale of a non-financial nature |
2,500 |
|
|
28 |
|
28 |
|
|
|
Miscellaneous payables and other non-current liabilities |
766 |
|
|
2 |
|
2 |
|
2 |
0.3 |
Trade and miscellaneous payables and other current liabilities |
7,699 |
7 |
24 |
170 |
25 |
226 |
(30) |
196 |
2.5 |
Liabilities directly associated with Discontinued operations/Non-current assets held for sale of a non-financial nature |
1,254 |
|
11 |
19 |
|
30 |
|
|
|
(*)Other related parties through directors, statutory auditors and key managers, and also as participants in shareholders' agreements pursuant to Article 122 of the Consolidated Law on Finance. |
Telecom Italia Group Condensed
Consolidated Financial Statements at March 31, 2014 |
Note 13
Segment reporting |
103 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION LINE ITEMS AT 12/31/2013
(millions of euros) |
Total |
Related Parties |
|
|
Associates and joint ventures |
Companies controlled by associates and joint ventures |
Other related parties (*) |
Pension funds |
Total related parties |
Transactions of Discontinued Operations |
Total related parties net of Disc.Op. |
% of financial statement item |
|
(a) |
|
|
|
|
|
|
(b) |
(b/a) |
Net financial debt |
|
|
|
|
|
|
|
|
|
Non-current financial assets |
(1,256) |
|
(6) |
(116) |
|
(122) |
|
(122) |
9.7 |
Securities other than investments (current assets) |
(1,348) |
|
|
(39) |
|
(39) |
|
(39) |
2.9 |
Financial receivables and other current financial assets |
(283) |
|
|
(11) |
|
(11) |
|
(11) |
3.9 |
Cash and cash equivalents |
(5,744) |
|
|
(48) |
|
(48) |
|
(48) |
0.8 |
Current financial assets |
(7,375) |
|
|
(98) |
|
(98) |
|
(98) |
1.3 |
Discontinued operations/Non-current assets held for sale of a financial nature |
(657) |
|
|
|
|
|
|
|
|
Non-current financial liabilities |
31,084 |
56 |
|
150 |
|
206 |
|
206 |
0.7 |
Current financial liabilities |
6,119 |
70 |
|
316 |
|
386 |
|
386 |
6.3 |
Liabilities directly associated with Discontinued operations/Non-current assets held for sale of a financial nature |
27 |
|
|
|
|
|
|
|
|
Total net financial debt |
27,942 |
126 |
(6) |
252 |
|
372 |
|
372 |
1.3 |
Other statement of financial position line items |
|
|
|
|
|
|
|
|
|
Trade and miscellaneous receivables and other current assets |
5,389 |
4 |
2 |
238 |
|
244 |
(27) |
217 |
4.0 |
Discontinued operations/Non-current assets held for sale of a non-financial nature |
2,871 |
|
|
27 |
|
27 |
|
|
|
Miscellaneous payables and other non-current liabilities |
779 |
|
|
2 |
|
2 |
|
2 |
0.3 |
Trade and miscellaneous payables and other current liabilities |
8,649 |
8 |
53 |
214 |
24 |
299 |
(48) |
251 |
2.9 |
Liabilities directly associated with Discontinued operations/Non-current assets held for sale of a non-financial nature |
1,534 |
|
20 |
28 |
|
48 |
|
|
|
(*) Other related parties through directors, statutory auditors and key managers, and also as participants in shareholders' agreements pursuant to Article 122 of the Consolidated Law on Finance. |
Condensed Consolidated Financial Statements
of the Telecom Italia Group at March 31, 2014 |
Note 14
Related Party Transactions |
104 |
CONSOLIDATED STATEMENT OF CASH FLOWS LINE ITEMS — 1ST QUARTER
2014
(millions of euros)
|
Total
|
Related
Parties
|
|
|
Associates
and joint ventures
|
Companies
controlled by associates and joint ventures
|
Other related
parties (*)
|
Pension
funds
|
Total
related parties
|
Transactions
of Discontinued Operations
|
Total
related parties net of Disc.Op.
|
% of
financial statement item
|
|
(a)
|
|
|
|
|
|
|
(b)
|
(b/a)
|
Purchase of
intangible and tangible assets on an accrual basis
|
684
|
|
15
|
|
|
15
|
|
15
|
2.2
|
(*) Other
related parties through directors, statutory auditors and key managers, and
also as participants in shareholders' agreements pursuant to Article 122 of
the Consolidated Law on Finance.
|
CONSOLIDATED STATEMENT OF CASH FLOWS LINE ITEMS — 1ST QUARTER
2013
(millions of euros)
|
Total
|
Related Parties
|
|
|
Associates and joint ventures
|
Companies controlled by associates and
joint ventures
|
Other related parties (*)
|
Pension funds
|
Total related parties
|
Transactions of Discontinued Operations
|
Total related parties net of Disc.Op.
|
% of financial statement item
|
|
(a)
|
|
|
|
|
|
|
(b)
|
(b/a)
|
Purchase of intangible and tangible assets
on an accrual basis
|
766
|
|
20
|
|
|
20
|
|
20
|
2.6
|
(*) Other related parties through
directors, statutory auditors and key managers, and also as participants in
shareholders' agreements pursuant to Article 122 of the Consolidated Law on
Finance.
|
Condensed
Consolidated Financial Statements
of the
Telecom Italia Group at March 31, 2014
|
Note 14
Related
Party Transactions
|
105
|
Remuneration to Key Managers
In the first quarter of 2014, the total
remuneration recorded on an accrual basis by Telecom Italia S.p.A. or by
companies controlled by the Group in respect of key managers amounted to 1.8
million euros (4.7 million euros in the first quarter of 2013), broken down as
follows:
(millions of euros)
|
|
1st Quarter
|
|
1st Quarter
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
Short-term remuneration
|
|
1.7
|
|
2.0
|
|
Long-term remuneration
|
|
|
|
0.4
|
|
Employment termination benefit incentives
|
|
|
|
2.1
|
|
Share-based payments (*)
|
|
0.1
|
|
0.2
|
|
|
|
1.8
|
|
4.7
|
|
(*) These refer to
the fair value of the rights, accrued to March 31, under the share-based
incentive plans of Telecom Italia S.p.A. and its subsidiaries (LTI Plans).
The amounts shown in the table for the
first quarter of 2014 do not include the effects of the cancellation of the
assessments pertaining to the 2011 LTI Plan carried out in 2011, 2012 and 2013,
due to the failure to achieve the three-year performance targets. These are
broken down below:
– Long-term remuneration of -1.4 million euros
– Share-based payments of -1.2 million euros
Short-term remuneration is paid during
the period it pertains to, and, at the latest, within the six months following
the end of that period. Long-term remuneration is paid when the related right
becomes vested.
In the first quarter of 2014, the
contributions paid in to defined contribution plans (Assida and Fontedir) by
Telecom Italia S.p.A. or by subsidiaries of the Group on behalf of key managers
amounted to 54,000 euros (102,000 euros in the first quarter of 2013).
In the first quarter of 2014, “key
managers”, that is those who have the power and responsibility, directly or
indirectly, for the planning, direction and control of the operations of the
Telecom Italia Group, including directors, included:
Directors:
|
|
|
Marco
Patuano
|
|
Managing
Director and Chief Executive Officer of Telecom Italia S.p.A.
|
Managers:
|
|
|
Rodrigo
Modesto de Abreu
|
|
Diretor
Presidente Tim Participações
|
Simone
Battiferri
|
|
Head of
Business
|
Franco
Brescia
|
|
Head of
Public & Regulatory Affairs
|
Antonino
Cusimano
|
|
Head of
Corporate Legal Affairs
|
Stefano De
Angelis
|
|
Dirección General Ejecutiva
(CEO) Telecom Argentina
|
Mario Di
Loreto
|
|
Head of
People Value
|
Giuseppe
Roberto Opilio
|
|
Head of
Technology
|
Piergiorgio
Peluso
|
|
Head of
Administration, Finance and Control
|
Luca
Rossetto
|
|
Head of
Consumer
|
Alessandro
Talotta
|
|
Head of
National Wholesale Services
|
Paolo
Vantellini
|
|
Business
Support Officer
|
Condensed Consolidated Financial Statements
of the Telecom Italia Group at March 31, 2014
|
Note 14
Related Party Transactions
|
106
|
Note
15
Events subsequent to March 31, 2014
Agreement
with Gruppo Editoriale L’Espresso
On April 9, 2014 Telecom Italia Media
and Gruppo Editoriale L’Espresso (Gruppo Espresso) signed agreements which
provide for the merger of the network operator businesses for DTTV controlled
by Telecom Italia Media Broadcasting S.r.l. (TIMB) and Rete A S.p.A. (Rete A),
respectively.
The merger between TIMB and Rete A,
which own three and two digital multiplexes, respectively, will give rise to
the largest independent network operator in Italy, holding five digital
multiplexes and nationwide high-coverage infrastructure, based on next
generation technologies. The group resulting from the operation will be the primary
supplier for the leading non-integrated national and foreign television content
providers operating on the Italian market. This operation will also generate
significant industrial synergies.
The merger will be carried out through
Gruppo Espresso's contribution of 100% of Rete A shares to TIMB. Following the
contribution, Telecom Italia Media and Gruppo Espresso will hold 70% and 30%,
respectively, of shares in TIMB, which will control Rete A's entire share
capital. Gruppo Espresso will retain its investment in All Music S.p.A.
According to the agreement signed, once
the merger is completed, a process will be launched to enhance the value of the
combined entity, entailing the search for interested investors.
Bearing in mind the uncertainty
surrounding legislative developments on the use of frequencies, Telecom Italia
Media also retained a purchase option on user licenses (thus excluding
infrastructure and customers) for one of the five frequencies controlled by the
combined entity.
The operation is expected to be
finalized by June 2014, subject to authorization being obtained from AGCom.
2014-2016
Stock Option Plan
The ordinary and extraordinary
shareholders' meeting held on April 16, 2014 approved the 2014-2016 stock
option plan for a portion of the management holding key organizational
positions for the purposes of company business. The plan covers a maximum of
196,000,000 options, which grant the beneficiaries the right to subscribe or
purchase (at the end of the three-year vesting period, subject to the
achievement of the performance targets: related Total Shareholder Return and
the Cumulated Free Cash Flow as per the 2014-2016 Plan) the same amount of
Telecom Italia ordinary shares, at a strike price in line with the market price
of the share at the time the plan was launched. The board of directors is
vested with all the powers necessary to establish the plan regulations and to
implement it.
The Shareholders' Meeting approved also
the mandate to increase the capital for cash, exclusively to service the stock
option plan, for a maximum of 196,000,000 newly issued ordinary shares (with a
maximum dilution of 1.01% of the total capital and 1.46% of the ordinary shares
only at December 31, 2013).
Condensed Consolidated Financial Statements
of the Telecom Italia Group at
March 31, 2014
|
Note 14
Related Party Transactions
|
107
|
A428 Antitrust Proceedings
In May
2013, at the conclusion of procedure A428, the Italian antitrust authority
(AGCM) imposed two fines totalling more than 103 million euros on Telecom
Italia, for alleged abuse of its dominant position in the access services
market. The order was challenged before the Lazio Regional Administrative Court
(TAR).
On May 8,
2014 the judgement of the Lazio TAR was published, rejecting Telecom Italia's
appeal and confirming in full the fines imposed in the original order
challenged.
Telecom
Italia has reiterated that its actions were correct with regards to equality of
access to the network for alternative Operators and the Company will appeal the
decision to the Council of State (Consiglio di Stato) for recognition of the
absolute legality of its conduct towards its competitors. Finally, it should
be noted that the liabilities already allocated in the consolidated Financial
Statements at December 31, 2013 cover the full amount of the two fines imposed
by the Authority.
Condensed Consolidated Financial Statements
of the Telecom Italia Group at
March 31, 2014
|
Note 14
Related Party Transactions
|
108
|
![](x15062318430800.jpg)
Condensed
Consolidated Financial Statements
of the
Telecom Italia Group at March 31, 2014
|
Note 15
Events
subsequent to March 31, 2014
|
109
|
Declaration by the Manager Responsible for Preparing the Corporate Financial Reports
The manager responsible for preparing the corporate financial reports declares, pursuant to paragraph 2, article 154-bis of the Consolidated Law on Finance, that the accounting disclosures contained in the Interim Report at March 31, 2014 of the Telecom Italia Group correspond to the Company’s documents, accounting records and entries.
The Manager Responsible for Preparing
the Company's Financial Reports
Piergiorgio Peluso
Condensed Consolidated Financial Statements
of the Telecom Italia Group at March 31, 2014 |
Note 15
Events subsequent to March 31, 2014 |
110 |
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the United States Private Securities Litigation Reform Act of 1995.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. The Group's interim report as of and for the three months ended March 31, 2015 included in this Form 6-K contains certain forward-looking statements. Forward-looking statements are statements that are not historical facts and can be identified by the use of forward-looking terminology such as "believes," "may," "is expected to," "will," "will continue," "should," "seeks" or "anticipates" or similar expressions or the negative thereof or other comparable terminology, or by the forward- looking nature of discussions of strategy, plans or intentions.
Actual results may differ materially from those projected or implied in the forward-looking statements. Such forward-looking information is based on certain key assumptions which we believe to be reasonable but forward-looking information by its nature involves risks and uncertainties, which are outside our control, that could significantly affect expected results.
The following important factors could cause our actual results to differ materially from those projected or implied in any forward-looking statements:
1. our ability to successfully implement our strategy over the 2015-2017 period;
2. the continuing effects of the global economic crisis in the principal markets in which we operate, including, in particular, our core Italian market;
3. the impact of regulatory decisions and changes in the regulatory environment in Italy and other countries in which we operate;
4. the impact of political developments in Italy and other countries in which we operate;
5. our ability to successfully meet competition on both price and innovation capabilities of new products and services;
6. our ability to develop and introduce new technologies which are attractive in our principal markets, to manage innovation, to supply value added services and to increase the use of our fixed and mobile networks;
7. our ability to successfully implement our internet and broadband strategy;
8. our ability to successfully achieve our debt reduction and other targets;
9. the impact of fluctuations in currency exchange and interest rates and the performance of the equity markets in general;
10. the outcome of litigation, disputes and investigations in which we are involved or may become involved;
11. our ability to build up our business in adjacent markets and in international markets (particularly in Brazil), due to our specialist and technical resources;
12. our ability to achieve the expected return on the investments and capital expenditures we have made and continue to make in Brazil;
13. the amount and timing of any future impairment charges for our authorizations, goodwill or other assets;
14. our ability to manage and reduce costs;
15. any difficulties which we may encounter in our supply and procurement processes, including as a result of the insolvency or financial weaknesses of our suppliers; and
16. the costs we may incur due to unexpected events, in particular where our insurance is not sufficient to cover such costs.
The foregoing factors should not be construed as exhaustive. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof, including, without limitation, changes in our business or acquisition strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: June 23th, 2015
TELECOM ITALIA S.p.A.
BY: /s/ Umberto Pandolfi
---------------------------------
Umberto Pandolfi
Company Manager
Telcom Italia (PK) (USOTC:TIAOF)
Historical Stock Chart
From Jun 2024 to Jul 2024
Telcom Italia (PK) (USOTC:TIAOF)
Historical Stock Chart
From Jul 2023 to Jul 2024