Telecom Italia slows revenue decline in 2014, unveils new 3-year plan

Telecom Italia reported a decrease in revenue and core earnings in preliminary results for the 2014 financial year, but said the rate of domestic revenue decline slowed over the year while analysts noted that targets to cut debt were met.

The company also revealed that its new three-year plan has been approved: a total of €14.5 billion ($16.4 billion) is to be spent on investments in Italy and Brazil from 2015-2017. Around €10 billion has been earmarked for investments in Italy including the expansion of fibre (to 75 per cent population coverage) and LTE (to 95 per cent coverage), while more than €4 billion is to be spent on improving 3G and 4G coverage in Brazil.

"In particular, Telecom [Italia] aims to grasp the opportunities deriving from the so-called quadruple play, namely the joint offer of fixed and mobile telephony, broadband/ultra-broadband connectivity and premium content that can be accessed any time, anywhere, on any device," the company said.

Under the new 2015-2017 plan, the company expects to save around €1 billion over the three years due to cost efficiencies.

The operator, which also said this week it will launch an offer to buy out minority shareholders in Telecom Italia Media, added that its strategy so far of investing in high-speed fixed and mobile broadband networks to meet demand for converged services is paying off. Earlier this week, CEO Marco Patuano said the operator had "smashed" the annual targets of its 2014-2016 plan, reaching more than 80 per cent of the population with its 4G services and 30 per cent with fibre broadband.

In 2014, group revenue decreased in organic terms by 5.5 per cent year on year to €21.5 billion, while consolidated EBITDA fell by 6.8 per cent in organic terms to €8.7 billion. Including the effects of changes in foreign exchange and consolidation, revenue dropped by 7.8 per cent and EBITDA by 7.9 per cent.

In the domestic unit, revenue fell by 7.5 per cent to €14.1 billion while EBITDA was 10.6 per cent lower at €6.7 billion. The company has not yet reported a figure for its full-year net profit or loss.

The company also confirmed its target of stabilising domestic EBITDA in 2016, and said it expected to show increased performance in 2017.

Despite the revenue decline in Italy during 2014, the company noted that its domestic performance showed a continual recovery over the year. For example, while revenue in the fourth quarter declined by 4.4 per cent year-on-year, this represented a recovery of 4.7 percentage points compared to the fourth quarter of 2013. Furthermore, the drop in Q4 2014 was an improvement over a 6.2 per cent year-on-year decline in Q3 2014, an 8.9 per cent year-on-year decline in Q2 2014 and an 8.8 per cent drop in the first quarter.

The company also noted that its net financial debt--which has been a cause of ongoing concern for investors and credit rating agencies--stood at €26.6 billion at the end of 2014, down by €156 million compared to 2013. According to Bloomberg, the debt was almost half a billion euros less than had been projected by analysts.

Earlier this week, Telecom Italia also said it is starting to bring all of its services under the TIM brand, which is currently used only for its mobile offerings.

For more:
- see Telecom Italia's 2014 preliminary results statement
- see Telecom Italia's announcement on Telecom Italia Media
- see the Telecom Italia 2015-2017 plan
- see this Bloomberg article

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