Telecom Italia Bolsters Broadband in $16.4 Billion Program

Telecom Italia SpA will invest in faster broadband as part of a 14.5 billion-euro ($16.4 billion) spending plan to help Chief Executive Officer Marco Patuano return to earnings growth in Italy by 2017.

In the three years through 2017, Telecom Italia will spend about 3 billion euros on optic fiber for broadband in its home market, where it generates about 70 percent of revenue, the carrier said today in London. That’s an increase of more than 1 billion euros from the previous program and will extend the reach of fiber to 75 percent of the population.

“By 2017 this acceleration of investment in optic fiber is expected to increase the number of active customers by approximately 1 million compared to the targets of the previous plan,” Italy’s largest phone carrier said in a statement.

In Italy, Patuano is adding services in a bid to boost phone bills in a saturated market. Telecom Italia is discussing a partnership to start offering Netflix Inc.’s online video service in the country, he said in an interview at the London event.

In April, he teamed up with Rupert Murdoch’s Sky Italia SpA for an Internet- television service to attract broadband subscriptions, giving consumers an alternative to satellite TV. The phone company also is discussing with Silvio Berlusconi’s Mediaset SpA a pay-TV partnership, Patuano told reporters.

Brazil Carrier

Under the three-year investment program, Telecom Italia will spend about 10 billion euros in Italy and more than 4 billion euros in Brazil, where it controls the nation’s second-largest wireless carrier, Tim Participacoes SA. Consideration of a deal between Tim and smaller rival Oi SA in Brazil is “on hold,” Patuano said in an interview with CNBC today.

Telecom Italia today also reported that the pace of its revenue decline slowed and debt reduction showed some early results of Patuano’s turnaround efforts.

Patuano, seeking to lift Telecom Italia out of junk status, has sold assets to cut net debt, which stood at 26.7 billion euros at the end of last year -- still more than the company’s market capitalization of about 19 billion euros.

Fourth-quarter sales dropped 4.1 percent to 5.6 billion euros, the Milan-based company said today. That compared with a 9.1 percent decrease reported for the first nine months. Earnings before interest taxes, depreciation and amortization fell 8.4 percent to 2.2 billion euros, in line with analysts’ estimates.

In the three-year plan, Telecom Italia confirmed a target to stabilize domestic Ebitda for 2016 and increase it for 2017

Longest Recession

Patuano’s efforts may be helped by improvements in the euro-region’s third-biggest economy. Italy will start emerging from its longest recession on record in the coming months, benefiting from the lower euro and dropping oil prices in addition to the fresh monetary stimulus from the European Central Bank, Intesa Sanpaolo SpA Chief Economist Gregorio De Felice said at a conference in Rome last month.

Still, Italy’s wireless market of four network providers is one of Europe’s most competitive. Countries including Germany, Austria and Ireland have recently seen consolidation that cut their number of national carriers to three. The carrier on Thursday announced a plan to buy out its Telecom Italia Media SpA business, a move that would end more than a decade of the unit as a publicly traded company.

Telecom Italia shares fell 1.1 percent to 1.01 euros in Milan, trimming its advance this year to 15 percent.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE