Telecom Italia Quarterly Sales Rise on Mobile Subscriber GrowthBy
Earning hit by one-time cost linked to ‘golden power’ rule
Carrier says Vivendi no longer controls its direction
Telecom Italia SpA posted first-quarter sales that beat analysts’ estimates driven by growth in domestic mobile and broadband subscriber numbers.
In the carrier’s first results since U.S. activist investor Elliott Management Corp. took control of its board this month, Telecom Italia said revenue rose 2.7 percent in organic terms to 4.71 billion euros ($5.5 billion). That compared with the average prediction of analysts of 4.67 billion euros. Domestic mobile sales advanced 4.7 percent.
Elliott defeated Vivendi SA after shareholders supported its call to improve corporate governance and push for asset sales and a reintroduced dividend. Elliott, with about 8.9 percent of the stock, says the carrier has suffered under the influence of Vivendi, the biggest shareholder with about 24 percent.
Telecom Italia shares rose 1.4 percent at 9:05 a.m. in Milan.
The spat over the board comes as Telecom Italia’s management braces for competition from French discount carrier Iliad SA, whose imminent Italian foray will create a fourth mobile operator with assets it bought from CK Hutchison Holdings Ltd. and Veon Ltd. -- which merged their local units to form Wind Tre.
Telecom Italia said the quarterly results showed strength in Italy, including “impressive” growth in the mobile business, and a recovery of its Brazilian unit.
“We continue to see the investment case in TI as one of the most interesting in the sector,” James Ratzer, an analyst at New Street Research said in a note to clients. “Political issues, potential technical selling post the Elliott Board victory, and commentary from the company in advance of the first-quarter results haven’t helped the stock in the past 2 weeks, but we still see the longer-term bull case from growth in the broadband market as very much intact.”
Adjusted earnings before interest, taxes, depreciation and amortization fell 4.9 percent to 1.89 billion euros. Profit was hit by one-time charges of 95 million euros, mainly linked to a 74.3 million-euro fine for allegedly breaking Italy’s so-called Golden Power rule.
Telecom Italia is contesting Italy’s decision last year to exercise the rule over the former monopoly’s assets deemed of national importance -- a move aimed at reducing Vivendi’s influence. In a separate statement on Wednesday, Telecom Italia’s board in that Vivendi no longer exercises “direction and coordination” over the carrier after the loss of control of the board.