Telecom Italia reports drop in H1 profit, puts hopes in Three/Wind merger

Telecom Italia reported a 16.4 per cent year-on-year drop in EBITDA for the first half of 2015 after the company was hit by a one-off charge of €399 million ($436 million) linked to provisions for regulatory and legal risks.

The operator said first-half EBITDA was €3.6 billion, and net profit fell by 47.2 per cent to €439 million due to the non-recurring charges and other costs such as those connected with a recent bond buyback. Revenue in the first six months fell by 4.3 per cent to just over €10 billion.

The company, which is also now preparing for changes in the Italian mobile market with the proposed merger of rivals Three Italy and Wind, said it saw improving trends in the second quarter of the year, when revenue in its domestic market increased by €113 million from the first quarter to reach €3.74 billion. Total group revenue was stable at €5.05 billion compared to the first quarter of 2015, although year-on-year it was down from €5.36 billion.

CEO Marco Patuano said that the underlying trend for domestic EBITDA was positive: Excluding the impact of both non-recurring charges and other exceptional items, the decline in domestic EBITDA before one-off items on an annual basis fell to 2.7 per cent in the second quarter from 4.8 per cent in the first quarter.

Telecom Italia chairman Giuseppe Recchi stressed that the operator is starting to see the fruits of its investments in high-speed fixed and mobile broadband networks, and content. In the first six months, the company increased its capex by 25.7 per cent year on year to over €2 billion.

Nevertheless, the company remains under pressure on its domestic market, only recently announcing plans to cut jobs by 1,700 to reduce overall labour costs. It is now hoping that the reduction in the number of mobile operators from four to three will take the pressure of prices and end a long price war on the market.

According to Reuters, Patuano said that news of the merger could only improve the situation with regard to margins in the Italian market.

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

Related articles:
VimpelCom, Hutchison agree to merge Wind and Three Italy
Telecom Italia hails first profit in 3 years; seeks up to €2B in bond issue
Telecom Italia plans to slash 1,700 jobs
Telecom Italia rebrands all services under TIM
Generali cut Telecom Italia stake as Vivendi moved to become largest shareholder