Telecom Italia almost triples cost-cutting target as Q1 core profit drops 16%

Telecom Italia increased its cost-cutting target to €1.6 billion ($1.8 billion) from €600 million by 2018 as the Italian operator's new CEO stepped up efforts to improve profitability.

Flavio Cattaneo, who took over from Marco Patuano in March, said the goal was to cut €800 million in operating costs and €800 million in capital expenditure though "targeted actions", including a reduction in labour costs and the simplification of IT and network platforms. The move represents an update to the company's strategy for the three years to 2018.

The CEO made the announcement during the presentation of the Italian operator's results for the first quarter of 2016, when EBITDA fell almost 16 per cent to €1.7 billion.

Reuters noted that this was below a consensus of analysts' forecasts of €1.79 billion provided by the company. The average of analyst estimates compiled by Bloomberg was for EBITDA of €1.83 billion.

The profit attributable to shareholders improved to €433 million in the first quarter of 2016 from €82 million in the same period of 2015, although the company noted that this benefited from some items of a purely accounting and valuation nature.

Group revenue fell 12 per cent year on year to €4.44 billion, which Reuters noted was slightly below expectations. Domestic consumer revenue increased by 2 per cent to €1.8 billion. The company said this confirmed the recovery trend already underway in 2015 that was particularly attributable to the mobile sector. Here, revenue increased 8.9 per cent year-on-year to €855 million.

Net debt at the group fell to €27.1 billion, which was €139 million less than at the end of 2015.

Telecom Italia chairman Giuseppe Recchi said the company was entering a new phase that would be characterised by "efficiency and focus on ever more challenging goals."

He added that the company planned to meet the rising demand for fixed and mobile broadband services, with coverage targets of 84 per cent population coverage for fibre (45 per cent at present) and 98 per cent for 4G (92 per cent now) by 2018.

For more:
- see the Telecom Italia results
- see this Bloomberg article
- see this Reuters article

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