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Telecom Italia Reports 1H07

Revenues for the first half of the year were flat at €15.47 billion, up 0.9 percent from the first half of 2006

July 25, 2007

5 Min Read

MILAN, Italy -- The Telecom Italia Board of Directors, chaired by Pasquale Pistorio, today examined the Group’s preliminary first-half 2007 results.

TELECOM ITALIA GROUP

The consolidation area of the Telecom Italia Group as at 30 June 2007 differs from 30 June 2006 and 31 December 2006 as follows:

  • Inclusion: AOL Internet operations in Germany (consolidated from 1 March 2007);

  • Exclusions: Digitel Venezuela (sold in May 2006), previously stated as discontinued or soon-to-be discontinued operations, Ruf Gestion (sold in March 2006), Eustema (sold in April 2006), Telecom Italia Learning Services (sold in July 2006) and other minor businesses.



First-half 2007 revenues rose by 0.9% to 15,470 million euros, compared with a first half 2006 figure of 15,335 million euros. Excluding the effects of exchange rate fluctuations (-40 million euros) and changes to the scope of consolidation (+149 million euros), organic growth was equal to 0.2% (+26 million euros).

In compliance with AGCOM Italian communications regulatory authority resolution no. 417/06/CONS, since 1 January 2007 Telecom Italia only provides billing services for customer calls to other carriers' non-geographical numbers, and is therefore no longer liable for the insolvency risk associated with these receivables. Since that date, interconnection revenues and associated costs have no longer taken into account the traffic generated by such calls, which in the first half of 2006 totaled 230 million euros and were entered onto the Fixed Line Domestic unit accounts (along with the entry of a corresponding figure as costs).

Excluding this item, organic growth was equal to 1.7%. Moreover, compared with the same period in 2006, revenues for the first half of 2007 were impacted by the application from March 2007 of the so-called “Bersani Decree” (-163 million euro), by the effects of changes to termination rates that came into force in the second half of 2006 (-95 million euros), and by self-regulation of international roaming tariffs in compliance with European Commission rulings (-20 million euro).

Compared to the first half of the preceding year, these changes (including the non-geographical numbering modifications) had a total value of 508 million euro.

The main drivers of organic growth during the first half of 2007 included growth in Brazil Mobile BU operations (+620 million euros), a significant additional 114 million euro contribution from the European Broadband BU spurred by customer portfolio growth in France and Germany, and additional revenues from the Media BU, driven by advertising revenue growth and higher revenues from Digital Terrestrial operations.

EBITDA (operating result before depreciation and amortization, capital gains/losses and renewal/write-downs of non-current activities) amounted to 6,314 million euros, 3.1% lower than the first half of 2006 (-204 million euros). The EBITDA margin for the first half of 2007 was equal to 40.8% (42.5% for the first half of 2006). Excluding the effects of exchange-rate fluctuations and changes to the consolidation area, the organic difference amounted to -2.8% (-186 million euros):

It should be noted that the above mentioned changes had a negative impact on EBITDA of 191 million euros (163 million euros stemming from the Bersani Decree and 28 million euros from fixed-mobile termination).

The organic EBITDA margin amounted to 41.6% (down 1.3pp on the figure of 42.9% registered for the first half of 2006; this is better than the annual target of -2.5% to -2.0% on the FY 2006 figure of 41.5%).

EBIT (operating result) amounted to 3,469 million euros, down 332 million euros compared with the first half of 2006 (-8.7%).

The EBIT margin was down from 24.8% for the first half of 2006 to 22.4% for the first half of 2007.

Excluding other non-organic variations and the effect of changes to the exchange rates and the area of consolidation, the organic difference came to -204 million euros (-5.4% compared with first quarter 2006). The organic EBIT margin was 23.1% (down 1.4% on the figure of 24.5% registered for the first half of 2006; this is better than the annual target of -3.0% to -2.5% on the FY 2006 figure of 24.0%).

The first-half 2007 consolidated net result is expected to be at least equal to the first-half 2006 result.

Industrial investment in the first half of 2007 amounted to 2,474 million euros, 258 million euros more than the corresponding period last year. This was mainly due to greater investment in the development of domestic telecommunications (+102 million euros), the European Broadband (+24 million euros) and Brazilian Mobile (+78 million euros).

Net financial debt at 30 June 2007 stood at 39,175 million euros (37,301 million euros at year-end 2006). Notwithstanding the 1,625 million euros generated by cash flow from operations since year-end 2006, debt increased as a result of the AOL acquisition (669 million euros) and dividend payouts (2,830 million euros). It should be noted that this net financial debt figure does not yet benefit from the sale of equity stakes (Oger, Solpart and Capitalia of which more detail is provided at the end of the press release in the section relating to EVENTS FOLLOWING 30 JUNE) subsequent to 30 June 2007 and worth a total of over 850 million euros.

Compared with 31 March 2007 (37,183 million euro), the debt increase was essentially due to dividend payments.

At 30 June 2007, the Group employed 83,812 people, compared with the year-end 2006 figure of 83,209. The 1,101-person rise is wholly ascribable to the AOL acquisition.

Telecom Italia (TIM)

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