Telecom Italia First-Half Profit Beats Analysts Estimates

Telecom Italia SpA (TIT), Italy’s largest phone company, posted a first-half profit that beat analyst estimates and confirmed its full-year forecasts and dividend policy. The shares rose as much as 4.7 percent.

Net income was 1.25 billion euros ($1.53 billion) compared with a restated net loss of 2.04 billion euros a year earlier, when the Milan-based company took a 3.18 billion euro impairment charge related to its domestic business, it said today in a statement. Six analysts surveyed by Bloomberg estimated profit of 1.19 billion euros on average.

“In a complex macroeconomic context, the solid first half results allow us to confirm our full-year guidelines,” Chief Executive Officer Franco Bernabe said. He also confirmed “the sustainability of the dividend policy previously announced.”

Telecom Italia and other European former phone monopolies such as Spain’s Telefonica SA (TEF) are suffering in their home markets amid economies burdened by the sovereign-debt crisis. Last month, Telefonica scrapped its 2012 dividend and said it will resume half its payouts toward the end of next year, citing a challenging economic environment.

“Telecom Italia announced there is no dividend cut which was a primary market fear after Telefonica cut dividends to zero,” Saeed Baradar, an analyst at Societe Generale in London, wrote in a note today.

Shares Rise

Sales rose 1.7 percent to 14.8 billion euros, matching the average analyst estimate.

Telecom Italia was up 3 percent at 70.05 euro cents as of 9:19 a.m. in Milan, giving the company a market value of 12.9 billion euros. The stock has dropped 16 percent this year, compared with a 2.7 percent drop of the 23-member Bloomberg Europe Telecommunications Services Index.

A slowing economy in Brazil has affected the Italian company’s local business Tim Participacoes SA. (TIMP3) The unit reported a 0.9 percent decline in second-quarter profit on July 30 and said it saw “a strong deceleration” in first-half economic growth and “intensified” competition. It forecast a better economic environment in the second half. Telecom Italia’s Argentinian unit reported a 1 percent rise in first-half earnings.

“They beat expectations that had been heavily reduced by company commentary, results of competitors and their Brazilian unit where competition is rising and regulation getting tougher,” said Robin Bienenstock, an analyst at Sanford C. Bernstein. “Things got a little worse in the second quarter, which is hardly surprising given the Italian economy, but overall these are a long way from disaster.”

Brazil Regulator

In July, network failures prompted Brazil’s telecommunications regulator Anatel to suspend new sales of voice and data service by Tim, America Movil SAB’s Claro and Oi SA (OIBR4) in some states. The lifting of the ban will hinge on the investment plans presented by the companies to improve quality. Telecom Italia said today it’s “confident that, given the exhaustive nature of the plan, Anatel will lift the suspension shortly.”

Telecom Italia also named Chief Financial Officer Andrea Mangoni as managing director for South America. He will continue as CFO until a replacement is found.

In April, Bernabe said the company may consider separating its fixed-access network from its other business.

Debt Forecast

Telecom Italia’s earnings before interest, taxes, depreciation and amortization declined 1.6 percent to 5.86 billion euros. The company reiterated a February forecast of “essentially unchanged” revenue and Ebitda this year, excluding currency swings, acquisitions, disposals and non- organic income.

Domestic fixed-line revenue dropped 2.9 percent to 6.47 billion euros and mobile sales in Italy fell 3.4 percent to 3.38 billion euros.

Adjusted net debt rose to 30.4 billion euros at the end of June from 30.3 billion euros at the end of March. The company repeated a forecast that adjusted net debt will fall to about 27.5 billion euros at the end of 2012. “Recent bond issues contributed to maintaining a liquidity margin to cover our debt maturity until 2014,” Bernabe said in the statement.

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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