Revenues for the first half amounted to €15.3M, an increase of 5.6%; plans to split mobile phone unit from its media and broadband operations

September 12, 2006

5 Min Read

MILAN, Italy -- The Board of Directors of Telecom Italia met today under the chairmanship of Marco Tronchetti Provera and examined and approved Group accounts for the six months ending 30 June 2006.

TELECOM ITALIA GROUP

The Telecom Italia Group's financial results for the first six months of 2006 and the relative comparable period have been restated according to IFRS accounting standards approved by the European Union. The data for the two periods being compared have been recalculated taking into account activities which have been sold: Entel Chile Group (sold end-March 2005), Finsiel group (sold end June 2005), Digitel Venezuela (sold in May 2006), TIM Hellas (sold beginning June 2005), TIM Peru (sold in August 2005) and the Buffetti Group (sold January 2006). It should be noted that to render the data comparable on a like-for-like basis, the financial data for first half 2005 have been modified compared with those published in the results statement for the six months ending 30 June 2005, considering also TIM Peru and Gruppo Buffetti among Discontinued Operations.Beyond those which have been indicated as Discontinued Operations, it should be noted that in the first half of 2005 the Liberty Surf Group entered the Group's area of consolidation (bought 31 May 2005) while in the first half of 2006 some minor companies exited the consolidated area: Wirelab, Eustema and Ruf Gestion.

Revenues for the first half of 2006 amounted to 15,335 million euro, an increase of 5.6% compared with the first half of 2005 (14,528 million euro). Excluding the positive effect of exchange rate variations and the effects of changes in the area of consolidation, organic growth was 2.6% (+395 million euro).

EBITDA was 6,518 million euro, an increase of 0.5% compared with first half 2005. Excluding the effect of exchange rate variations and of changes in the area of consolidation and other non-organic variations, organic growth was 0.3% (+18 million euro). Always at the organic level, the ebitda margin was 43.2% (44.2% in first half 2005). This ratio, when compared with 2005, was mainly impacted by the cut in termination rates (-122 million euro) and growth in Brazil and the European Broadband Project.

EBITA amounted to 3,801 million euro, a variation of -4.5% compared with first half 2005 (-178 million euro). This result was impacted by greater depreciation and amortization (+347 million euro compared with first half 2005) due to greater investment in the development of network infrastructure and business support systems. Excluding the effect of exchange rate variations and changes to area of consolidation and other non-organic variations, the organic variation was negative for 247 million euro (-6.1% compared with first half 2005). Always at the organic level, the ebit margin in the first half of 2006 was 24.6% (26.9% in first half 2005).

Consolidated net profit in the first half of 2006 was 1,496 million euro (1,473 million before payments to third parties) and registers a variation of -15.7% compared with the first half of 2005 (1,775 million euro). As well as the effect of the above mentioned lower EBIT, this variation was impacted by a worsening of the balance of financial operations (the first half 2005 was boosted from the reversal of provisions, for 343 million euro, made as guarantees for the banks which had financed Avea), by profit decreases linked to activities which have been sold or are in the process of being sold (the first half 2005 included net capital gains on activities which had been sold for a total of 395 million euro, mainly linked to the sale of TIM Hellas -- against 31 million euro in first half 2006 from the sale of Digitel Venezuala), in part offset by lower profits attributable to Third Party Shareholders (+427 million euro ) primarily related to the Telecom Italia/TIM integration.

Industrial investment in the first half totalled 2,216 million euro, an increase of 48 million euro from 2005, mainly due to increased domestic investment in the development of support structures for the mobile sector (+106 million euro).

Net financial debt on 30 June 2006 stood at 41,315 million euro. Excluding the increase due to dividend payments (approximately 3 billion euro), Group debt decreased by over 700 million euro compared with 31 March 2006, due to generated net cashflow.

The Group headcount on 30 June 2006 was 84,695, a decrease of 789 compared with 31 December 2005 (85, 484).

Events after 30 June 2006

Agreement with Turk Telekom for the sale of a 40.56% stake in Avea

Telecom Italia on 14 July 2006 signed a contract for the sale to Turk Telekom of the 40.56% stake in the capital of Avea, Turkey’s third mobile operator, held through the Tim International subsidiary, for a total consideration of USD500 million.

With the acquisition, Turk Telekom, which already held 40.56% of Avea’s capital, increased its holding to 81.12%, while the remaining 18.88% remains in the hands of IS Bank.

The Telecom Italia Group will reinvest half of the proceeds from the sale (USD250 million) in the capital of Oger Telecom – in which it held 13.33% on 30 June 2006.

The transaction will have a positive impact on Telecom Italia Group net financial debt of USD100 million.

THE REORGANISATION PROCESS

Further, the Board of Directors of Telecom Italia, having shared and assumed the strategic option of accentuating the Group's focus on the broadband and media services business in Italy and the rest of Europe, examined and approved the roadmap for the reorganization of the Telecom Italia Group which entails:

  • The separation from Telecom Italia S.p.A. of the business of national mobile communication, through the conferment of the corresponding industrial complex into a separate company, also of new constitution;

  • The separation from Telecom Italia S.p.A. of the network for local wired access through the conferment of the corresponding industrial complex to a separate company, also of new constitution, with a mandate for the Chairman, to identify eventual further activities suitable for integration into the above mentioned industrial complex.



The Board of Directors will examine the opportunities of value enhancement of network activities and of the mobile communication business which may present themselves, as well as any further or different initiatives, as a function of the operational needs and sustainable development of the company.

Telecom Italia (TIM)

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