Telecom Italia shows signs of improvement, but scraps dividend payments

Telecom Italia said it will not pay shareholders a dividend for 2013, even though the Italian incumbent was able to cut its group net loss by €1 billion during the year.

The group net loss fell from €1.2 billion ($1.6 billion) in 2012 to €238 million in 2013, comprising a €674 million loss by the parent company and a €436 million profit from non-controlling interests. Earnings before interest, depreciation and amortisation (EBITDA) fell 9.4 per cent to €9.5 billion in 2013, although the group cut its net debt by €1.5 billion to €26.8 billion during the year.

That decline was not enough for management to approve dividend payments on its common shares, the first time it has declined payments since becoming a public company in 1997, Bloomberg reported. Paying shareholders may have angered Telecom Italia bondholders after a recent issue of convertible bonds, Bloomberg added.

Telecom Italia CEO, Marco Patuano, said the decision on dividends was taken to allow the company to "further strengthen the company's asset structure and to continue to invest in the networks."

Patuano added that an upturn in Telecom Italia's domestic performance in the final quarter of 2013 leaves the firm optimistic about 2014, when the "gradual recovery of the domestic market will allow us to remunerate all our shareholders again in the next financial year".

The company's investment in next generation technologies leave it "in a position to better respond to the growing demand for innovative and converging services", Patuano noted.

Telecom Italia will also continue to invest in mobile data networks in Brazil in the year ahead, Patuano said. The market was the only bright spot for the company's telecoms operations in 2013, with EBITDA growing from 5 million reais (€1.5 million/$2.1 million) in 2012 to 5.1 million reais in 2013.

Patuano recently denied reports that Telecom Italia is considering selling TIM Brasil to Vivendi-owned fixed line operator GVT.

Speculation about the move arose after Spanish incumbent Telefónica reached an agreement to increase its stake in Telecom Italia through the Telco shareholder group, which owns 22.4 per cent of the Italian operator. The move sparked rumours Telefónica could use its heightened control to force Telecom Italia to sell TIM Brasil, to avoid competition with the Spanish firm's local Vivo unit.

For more:
- see Telecom Italia's results announcement
- see this Bloomberg article

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