Bloomberg News

Telecom Italia Net Income Advances on Latin America Growth

November 13, 2011

(Adds closing share price starting in first paragraph.)

Nov. 11 (Bloomberg) -- Telecom Italia SpA, Italy’s biggest phone company, said third-quarter profit rose 33 percent, beating estimates, on growth in Latin America and after charges a year earlier to eliminate jobs. The stock climbed 5.3 percent.

Net income advanced to 807 million euros ($1.1 billion) from 608 million euros a year earlier, the Milan-based company said in a statement today. Revenue rose 13 percent to 7.52 billion euros, helped by the consolidation of Telecom Argentina SA. Analysts surveyed by Bloomberg had estimated net income at 708.5 million euros on sales of 7.46 billion euros. A year earlier, Telecom Italia had provisions of 240 million euros for job reductions.

“We have not only a hit but a beat here,” Saeed Baradar, a telecommunications sales specialist at Societe Generale in London, wrote in a note. “All trends across the board are improving.”

To spur growth abroad, Telecom Italia’s Brazilian unit Tim Participacoes SA in July agreed to buy AES Atimus Group to add network capacity in Sao Paulo and Rio de Janeiro. Tim, which surpassed billionaire Carlos Slim’s America Movil SAB to become Brazil’s second-largest wireless operator, said Nov. 1 that third-quarter profit more than doubled as the company added subscribers and ended subsidies for handset sales.

“The performance in our three main markets, Italy, Brazil and Argentina, has been very satisfactory with a substantial improvement,” Chairman Franco Bernabe said at a press conference in Milan today.

Shares Rise

Telecom Italia advanced 4.5 euro cents to 89.1 cents in Milan trading, giving the company a market value of 16.5 billion euros. The stock has declined 7.9 percent this year, exceeding the 6.5 percent fall in the 21-stock Bloomberg Europe Telecommunication Services Index.

Telecom Italia said today revenue excluding currency swings, acquisitions and disposals will be “substantially stable” this year, as will earnings before interest, taxes, depreciation and amortization on that basis.

Marco Greco, an analyst at Mediobanca, raised his recommendation on the stock today to “outperform” from “neutral,” citing higher cash flow and the “stabilizing” domestic business.

“As usual, foreign businesses performed better than the Italian one, but we appreciate the confirmation, already hinted in the second quarter, of an improvement of the Italian trend versus the less recent quarters,” Greco said in a note.

Reduced Debt

Telecom Italia’s adjusted net debt at the end of Sept. fell to 29.9 billion euros from 31.1 billion euros at the end of June. The company confirmed that adjusted net debt will total about 29.5 billion euros at the end of 2011, excluding the effects of Italy’s auction of frequencies for so-called long- term evolution, or LTE, technology in the domestic market. Telecom Italia is paying 1.2 billion euros for the spectrum. Including the payment, adjusted net debt will be 30.7 billion euros at the end of December.

“Debt fell below the psychological threshold of 30 billion euros for the first time in many years,” Bernabe said.

Telecom Italia and other former phone monopolies in Europe, such as Spain’s Telefonica SA, are suffering in their home markets because of weak economies amid sovereign debt concerns. This week Italian 10-year yields breached the 7 percent level that locked Greece, Portugal and Ireland out of the capital markets and forced them to seek aid.

Television Unit

Telecom Italia said today domestic sales fell 6.2 percent to 14.1 billion euros in the first nine months, hurt by a 9.2 percent decline in wireless revenue. To help revive its flagging performance at home, Telecom Italia promoted Marco Patuano in April to chief operating officer and managing director in charge of domestic operations.

Ebitda advanced 17 percent to 3.2 billion euros in the three months through Sept. 30.

Telefonica and partners Mediobanca SpA, Assicurazioni Generali SpA and Intesa Sanpaolo SpA own more than 22 percent of Telecom Italia through an entity called Telco SpA, according to Bloomberg data.

The company may consider partnerships for its television unit, Telecom Italia Media SpA, to boost growth and seek “synergies,” Bernabe said at the press conference. He ruled out a sale of the asset.

--Editors: Robert Valpuesta, Thomas Mulier.

To contact the reporter on this story: Chiara Remondini in Milan at cremondini@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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