Telecom Italia reports first profit since 2010

Telecom Italia has posted its 2014 full year results showing the telco achieved profits for the first time in three years. This follows the operator’s recently announced three-year strategic plan, under which it plans to invest some €14.5 billion to modernise its network infrastructure.

The telco reported a net profit of €1.35 billion, compared to a €647 million loss in 2013, and group EBIT rose 67% to €4.53 billion compared €2.72 billion the year before. Total group revenues amounted to €21.56 billion, falling almost 8% compared to the year before.

“During 2014 Telecom Italia successfully launched the process which is leading it to become a public company, oriented towards creating value for all stakeholders and promoting the development and growth of the countries where we operate,” Telecom Italia Chairman Giuseppe Recchi said. “Our ambition is to lead the next generation of progress in our country and the return to profit is a reason for great satisfaction for the new board.”

Owing €26.6 billion, Telecom Italia is heavily indebted and although it managed to shave off €156 million of the total last year, the figure remains significant for a company with a market capitalisation of around €20 billion. With this in mind, the telco announced it is raising €2 billion through a bond issuance to deal with some of the debt.

In terms of the telco’s operating markets, for its Italian operation it reported annual revenues of €14.2 billion, down 7.5% year-on-year (-6.6% if including ICT hardware manufacturing subsidiary Olivetti).

In Brazil, where the telco operates through its subsidiary TIM Brasil, annual revenues decreased by 2.1% year-on-year to BRL19.5 billion (approximately €6.2 billion). Mobile ARPU in Brazil was BLR17.7 (€5), down 4.8% from 2013. The operator said that as of February 2014 the ARPU, like revenues from services, was affected by a further reduction of the mobile termination rate.

“The 2014 results show that the choice to invest in our future is proving to be a winning one,” Managing Director Marco Patuano claimed. “The positive business trend in the first months of 2015, in line with the goals we had set ourselves, also confirms that Telecom iItalia is moving in the right direction and is returning to the role it deserves as an operator of primary importance in the telecommunications sector.”

Despite the positive notions and the return to profit, the telco also said it expects traditional telecoms services to continue to decrease in 2015. However, it claimed this would be partly offset by ‘innovative’ services, presumably referring to quad-play offers as outlined in its investment plan previously. It also said it predicts a further overall decrease in the domestic market, “but considerably less than in previous years,” as the telco put it.

Meanwhile, the operator has also announced the boards of Telecom Italia and Telecom Italia Media have confirmed the merger of the two companies. Telecom Italia Media, the operator’s media division of which it already owns 78%, has been publicly traded for over a decade. According to the telco, the purpose of the merger is to simplify and rationalise the group structure.