Telecom Italia SpA (TIT), Italy’s largest phone company, said first-quarter profit rose 10 percent, beating analyst estimates, helped by growth in Brazil and Argentina.
Net income advanced to 606 million euros ($785 million) from 549 million euros a year earlier, the Milan-based company said in a statement late yesterday. Revenue rose 4.5 percent to 7.39 billion euros. Analysts surveyed by Bloomberg estimated profit of 572.3 million euros on sales of 7.32 billion euros.
“Despite the complex economic context, the domestic market reported significant signs of recovery in revenue trends in the first quarter, sustaining margins of around 50 percent,” Executive Chairman Franco Bernabe said. “The excellent performance of Latin America continues.”
To spur growth overseas, Telecom Italia’s Brazilian unit Tim Participacoes SA (TIMP3) agreed in July to buy AES Atimus Group to add network capacity in Sao Paulo and Rio de Janeiro. Tim Participacoes previously said that first-quarter profit rose more than 29 percent. Telecom Italia’s Telecom Argentina SA (TECO2) unit, the country’s second-biggest phone company, has reported that earnings climbed 11 percent.
On May 5, Telecom Italia said that Luca Luciani stepped down as chief executive officer of its Brazilian unit and that Telecom Italia Chief Financial Officer Andrea Mangoni would replace him on a temporary basis.
“We are already looking at somebody that can take the role of Luca,” Bernabe said on a conference call today. “I will be myself very much involved in this transitory period but we are very confident that in three months’ time we will go back to normal.”
Domestic fixed-line and mobile revenue dropped 2.9 percent to 3.24 billion euros and 1.7 percent to 1.65 billion euros respectively in the first quarter, indicating a “marked improvement,” Bernabe said in the statement.
“Results were broadly in line with expectations, but the performance of the domestic mobile division was the positive surprise,” said Saverio Papagno, an analyst at AZ Fund Management in Luxembourg. Domestic mobile “is showing an improving trend, probably helped by a less aggressive pricing competition from other players.”
Telecom Italia said it’s beginning the process to sell its media business to focus on core activities and help it cut debt. Telecom Italia Media SpA (TME) said in a separate statement it will transfer its television assets to a separate company as part of the sale process. Telecom Italia controls 77.7 percent of its TV arm, which owns the La7 channel and 51 percent of MTV Italia. The business also has broadcasting infrastructure assets.
Bernabe said on the call that Telecom Italia is keeping “all options open” as it could sell individual assets or a combination of them, or “the whole company.”
“A complete exit of Telecom Italia from the TV frequencies is extremely unlikely” as in the future they may be used for mobile communications, Telecom Italia Media CEO Giovanni Stella said on a separate call today. Stella said that there is the “utmost flexibility to bring out the value” of Telecom Italia Media as all options will be considered.
Telecom Italia fell 0.5 percent to 84.2 euro cents in Milan, giving the company a market value of 15.6 billion euros. Telecom Italia Media jumped 13 percent to 17.8 euro cents.
Earnings before interest, taxes, depreciation and amortization advanced 1.2 percent to 2.96 billion euros. The company reiterated a February forecast of “essentially unchanged” revenue and Ebitda this year.
Adjusted net debt fell to 30.3 billion euros at the end of March from 30.4 billion euros at the end of last year. The company repeated a forecast that adjusted net debt will fall to about 27.5 billion euros at the end of this year.
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