Bloomberg News

Telecom Italia Posts Earnings Matching Estimates on Latin American Growth

February 24, 2012

Telecom Italia SpA (TIT) reduced its dividend payout for 2011 earnings as Italy’s biggest phone company focuses on cutting debt. The company forecast stable earnings and revenue this year.

Telecom Italia’s board proposed dividends of about 900 million euros ($1.2 billion) for 2011, down from 1.2 billion euros in 2010, “in light of the recent worsening of the macroeconomic climate and the goal to maintain the credit rating,” the Milan-based company said in a statement.

“Such a dividend policy contributes to confirming the path towards debt reduction outlined in the previous business plan,” Telecom Italia said.

Telecom Italia and other former phone monopolies in Europe, such as Spain’s Telefonica SA (TEF), are suffering in their home markets because of weak economies amid the sovereign debt crisis.

“Debt reduction is now the main focus to avoid a rating downgrade at all costs,” Mathieu Robilliard, an analyst at Exane BNP Paribas, wrote in a Feb. 21 note. “With a tough 2012 ahead in Italy, Telecom Italia must continue to cut costs to preserve its free cash flow.”

Telecom Italia declined 2.4 percent this year before today to 81.2 euro cents in Milan trading, compared with an 8.1 percent gain in the benchmark FTSE MIB Index.

Telecom Italia said full-year profit before some items climbed 7.3 percent, helped by growth in Latin America, and forecast “broadly stable” earnings and revenue this year.

Growth Abroad

Earnings before interest, taxes, depreciation and amortization were 12.3 billion euros, compared with 11.4 billion euros a year earlier, the company said in a statement today. Revenue climbed 8.7 percent to 29.96 billion euros. Analysts surveyed by Bloomberg had estimated profit of 12.3 billion euros on sales of 29.8 billion euros.

To spur growth abroad, Telecom Italia’s Brazilian unit Tim Participacoes SA (TIMP3) 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 in July to become Brazil’s second-largest wireless operator, said Feb. 16 that fourth-quarter net revenue grew 19 percent and Ebitda rose 8.7 percent. Telecom Italia also controls Telecom Argentina SA (TECO2), the country’s second-largest phone company.

Telecom Italia’s adjusted net debt at the end of 2011 was 30.4 billion euros, compared with 29.9 billion euros at the end of September. The company had forecast adjusted net debt to total about 29.5 billion euros at the end of last year, 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 was projected to be 30.7 billion euros at the end of December.

Fourth-quarter organic Ebitda rose 3.3 percent to 3.1 billion euros.

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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