Telecom Italia SpA (TIT) posted a bigger- than-estimated loss in 2011 after Italy’s largest phone company wrote down goodwill for 7.3 billion euros ($9.68 billion).
The net loss was 4.73 billion euros compared with net income of 3.12 billion euros a year earlier, the Milan-based company said in a statement today. Analysts surveyed by Bloomberg had estimated a loss of 612 million euros. Excluding the writedowns and other non-recurring items, net income in comparable terms was 2.6 billion euros, it said.
Last year “was tough for the global economy and even more so for Italy, which was hit by the sovereign debt crisis,” Chairman Franco Bernabe said in the statement. “The increased cost of capital caused by higher interest rates led to a reduction of the domestic goodwill value.”
The company wrote down the goodwill following “the Olivetti/Telecom Italia deals of 1999 and 2003” and the purchase of Telecom Italia Mobile minorities in 2005, Bernabe said. “The writedown has no financial consequences and no impact on the group’s debt reduction plans.”
Telecom Italia’s board proposed dividends of 4.3 cents and 5.4 cents per ordinary and savings share respectively, compared with 5.8 cents and 6.9 cents a year earlier.
“The loss is wider than expected because of the goodwill writedown, but in practice it doesn’t have an impact on the dividend distribution, because it’s a non-cash item,” said Saverio Papagno, an analyst at AZ Fund Management in Luxembourg.
Telecom Italia confirmed that earnings before interest, taxes, depreciation and amortization rose 7.3 percent in 2011, helped by growth in Latin America, and revenue advanced 8.7 percent to 29.96 billion euros. It also reiterated a February forecast of “essentially unchanged” Ebitda and revenue this year. The company gave preliminary 2011 figures in February.
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 surpassed billionaire Carlos Slim’s America Movil SAB in July to become Brazil’s second-largest wireless operator. In Latin America, Telecom Italia also controls Telecom Argentina SA (TECO2), the country’s second-largest phone company.
Telecom Italia fell 2.7 percent to 90 euro cents in Milan trading, giving it a market value of 16.5 billion euros.
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