El Towers Predicts Full-Year Earnings Will Exceed Target

EI Towers SpA is set to beat business-plan targets this year as the broadcasting tower company controlled by Mediaset SpA benefits from the transition to digital technology and long-term deals give it stable income during a recession.

“We expect 2012 to be in line with the first half, ahead of our targets,” Co-Chief Executive Officer Guido Barbieri said in an interview in Milan yesterday. “This performance also reflects the nature of our business, which is very predictable and not related to the economic cycle, allowing us to do well even during downturns.”

EI Towers said in July that first-half core revenue rose 7.8 percent from the pro-forma results of a year earlier to 116.5 million euros ($150 million) and earnings before interest, tax, depreciation and amortization jumped 21 percent on that basis to 46.4 million euros. That compares with the company’s forecasts of average annual growth of 4 percent for sales and 11 percent for Ebitda through 2016, according to Barbieri.

Telecom Italia Media SpA, the TV unit of Telecom Italia SpA, renewed its contract with EI Towers for 12 years in April. EI Towers, based near Milan, will benefit from the transition to digital audio broadcasting, so-called value-added services such as network planning and signal management for new clients, as well as the auction of new digital TV frequencies in Italy, said Barbieri. The bidding is expected in coming months, he said.

“Some of the frequencies will be reserved for new entrants, which presumably won’t have the broadcasting infrastructure and become potential new clients for us,” Barbieri said.

EI Towers shares rose 0.4 percent to 19.44 euros at the close of trading in Milan.

Silvio Berlusconi

EI Towers, which said in July that 2012 Ebitda could beat its original target, is scheduled to report third-quarter results on Oct. 31. Barbieri said the business plan will probably be updated by mid-2013.

The company was created this year from the combination of Digital Multimedia Technologies SpA and the spinoff of the infrastructure business of Mediaset’s Elettronica Industriale as Italy was completing the switch from analogue television to digital terrestrial TV. Elettronica Industriale owns 65 percent of EI Towers, according to data compiled by Bloomberg. Broadcaster Mediaset, controlled by former Premier Silvio Berlusconi, is EI Towers’ biggest client.

Italy’s economy, which contracted for a fourth straight quarter in the three months through June, isn’t affecting the company as contracts are for the long term and include an adjustment for inflation, Barbieri said.

Stock Outlook

The stock gained 3 percent this year before today, giving the company a market value of 547 million euros. The business is the only one of its type with a stock listing in Europe, according to Barbieri. U.S. peers include Crown Castle International Corp. and American Tower Corp., which gained 43 percent and 19 percent respectively this year before today.

“We need some time to explain to investors that the fundamentals of our business are completely in line with the ones of the U.S. peers,” Barbieri said. As the company delivers on its business plan “the share price will benefit.”

The company has about 2,700 tower sites, mainly in the TV broadcasting business, which represents 90 percent of yearly revenue. It also has 400 mobile telecommunications towers, and that number is predicted to rise to about 500 at the end of 2016 on increased demand for coverage with long-term evolution, or LTE, technology, Barbieri said.

The company, which had debt of 210 million euros at the end of June, may consider refinancing opportunities next year as bank facilities mature between 2013 and 2014, the Co-CEO said.

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