Telecom Italia heralds 'signs of change' despite fall in core profit

Telecom Italia CEO Marco Patuano said the company's performance in the first nine months of the year showed "signs of change" on its domestic market, proclaiming that the operator has overcome a price war thanks to its focus on quality of service.

However, the company still posted a decline in revenue and core profit in the nine-month period, indicating that there is still much work to be done. Group revenue in organic terms fell 6 per cent year on year to €15.9 billion ($19.8 billion) in the first nine months of 2014, while EBITDA dropped 6.4 per cent in organic terms to €6.5 billion. Including effects such as foreign exchange rates, revenue was down 9.1 per cent and EBITDA by 7.7 per cent.

The company still managed to turn round a year-ago group loss of €902 million with a net profit of €985 million, although this was largely attributable to the impact of a goodwill impairment loss of €2.1 billion in 2013.

Although domestic revenue fell by 7.2 per cent year on year both in reported and organic terms to €11.3 billion, the rate of revenue decline has slowed during the year. The company said it was able to slow the  decline thanks to a stabilisation of its customer base and mobile voice ARPU, and higher revenue from fixed broadband, ICT and mobile internet subscribers.

"Our investments are bringing concrete results: over 150,000 customers have subscribed to the Tuttofibra service to date and we're proceeding at an average rate of 1,500 new contracts per day. In mobile telephony as well, 4G is now a mature technology that is coming into daily use and distinguishes our offer from that of our competitors. The company's relaunch started in the Italian market," said Patuano.

Indeed, this week saw the launch of LTE Advanced services from Telecom Italia, which is now offering mobile data download speeds of up to 180 Mbps in 60 Italian cities, with more cities to follow in the coming weeks. The company said speeds would soon reach 225 Mbps.

"We are the biggest investor in Italy, at around 3 billion [euros] a year, and are currently implementing a plan to provide ultra fast broadband coverage which has brought optical fibre to 100 cities and LTE mobile telephony to 2,500 municipalities," added chairman Giuseppe Recchi.

Group capex in the first nine months of 2014 was down €397 million at €2.6 billion. At the end of September, net debt stood at €27.3 billion, which was €786 million less than at June 30.

For more:
- see Telecom Italia's results statement
- see Telecom Italia's LTE Advanced announcement

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