Telecom Italia 2015 Sales Miss Views on Brazil Challenges

  • The Italian carrier posted 1 billion euros in one-time costs
  • CEO Patuano is trying to attract more lucrative customers

Telecom Italia SpA reported 2015 revenue and earnings that missed analysts’ estimates as its Brazilian unit grappled with economic turmoil and a drop in the real and as a push to sell higher-priced broadband products at home failed to spur growth.

Sales fell 8.6 percent to 19.7 billion euros ($21.1 billion), the company said in a statement Tuesday. Analysts predicted 19.9 billion euros, the average of estimates compiled by Bloomberg. Telecom Italia will take a 1.1 billion euro charge linked to staff costs and other provisions.

Domestic revenue fell 2 percent to 15 billion euros. Chief Executive Officer Marco Patuano is trying to revive business at home with more lucrative broadband services while getting rid of wireless towers to reduce a net debt load of 27.3 billion euros. With four network providers, Italy’s wireless market is among Europe’s most competitive.

Full-year earnings before interest taxes, depreciation and amortization plunged 20 percent to 7 billion euros, missing analysts’ estimates of 7.5 billion euros. In the fourth quarter, Telecom Italia’s revenue fell 14 percent to 4.84 billion euros, in line with analysts’ estimates. Earnings declined 37 percent to 1.4 billion euros.

The stock declined 0.9 percent to 87 euro cents in Milan trading at 9:30 a.m., giving the company a market value of about 16 billion euros.

Patuano is contending with growing pressure to improve performance from Telecom Italia’s biggest shareholder, French media company Vivendi SAand its Chairman Vincent Bollore. In December, Vivendi won four board seats in a shareholder vote.

Telecom Italia said separately it will invest about 12 billion euros in Italian broadband services. In the three years through 2018, the company will spend about 3.6 billion euros on fiber in its home market where it generates about 70 percent of revenue. That’s an increase of about 2 billion euros from the previous plan and will extend the reach of fiber to 84 percent of the population from 75 percent.

In Brazil, Telecom Italia controls the nation’s second-largest wireless carrier, Tim Participacoes SA. The Milan-based phone company is working at a cost-cutting plan for Tim that will include the reduction of about 1,000 white-collar positions, about 8 percent of its workforce, people familiar with the matter have said. The company, which last year posted sales of 17.1 billion reais ($4.3 billion), has attracted merger interest from smaller rival Oi SA.

Telecom Italia on Tuesday confirmed its previous 14 billion reais investment plan for Brazil.

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