Telecom Italia 1Q Net Profit Slumps by 35%

MILAN -(Dow Jones)- Telecom Italia said Friday first-quarter net profit fell 35% from a year earlier, as domestic fixed-line revenue remained under pressure and losses widened in its Brazilian mobile business.

Italy's largest telecommunication operator said net profit in the period ended March 31 was EUR501 million, down from EUR775 million a year earlier and slightly under the EUR510 million average estimate of 15 analysts polled by Dow Jones Newswires.

Chief executive Franco Bernabe said Telecom Italia has received three binding offers for its French unit Alice France, but it isn't bidding for smaller Italian peer Tiscali.

Telecom Italia said first-quarter revenue was EUR7.298 billion, down 2.4% from EUR7.475 billion a year earlier, as stiffening competition in Italy's broadband market and regulatory changes hurt fixed-line sales.

A wider first-quarter loss at its TIM Participacoes Brazilian mobile unit, which has been the group's chief growth driver, also showed growing challenges in emerging markets. TIM management attributed the wider loss to stiffening competition and bad-debt provision.

However, Telecom Italia confirmed its 2008 targets as "domestic market performance offsets a temporary slowdown in international growth."

"First quarter results were weak, but pretty much in line with expectations, and there were no negative surprises," said asset manager Gianpaolo Rivano of GestiRE.

Italy's former monopoly said its closely-watched net debt was EUR35.4 billion at the end of March, down from EUR35.7 billion at the end of 2007.

Telecom Italia's new management, which took over in December, has pledged to focus on debt reduction and expansion in core domestic and international markets including Germany and Brazil, but ruled out more aggressive moves due to financial constraints.

"We have received three binding offers for Alice France and we are very satisfied (as to) how the process is going forward," CEO Bernabe said in a conference call with analysts, confirming the sale is in its final phase.

People close to the matter earlier told Dow Jones Newswires that telecom operators Iliad and Neuf Cegetel and cable operator Numericable submitted binding offers for Alice France.

Bernabe said that Telecom Italia won't present an offer for Italian broadband operator Tiscali, but will keep watching the situation closely.

Telecom Italia has been tipped as being interested in Tiscali's U.K. operations, using proceeds coming from Alice France's sale for a possible bid.

Telecom Italia shares have lost 37% since the start of the year due to prolonged uncertainty over the company's strategy.

The stock, which had been trading up more than 2% before the results, later eased back to close 1.8% higher at EUR1.34.

-By Giada Zampano, Dow Jones Newswires; 39 02 58 21 9907; giada.zampano@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 9th May 2008

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