MILAN -(Dow Jones)- Telecom Italia, Monday said first-quarter net profit rose 13% due to the buyout of its mobile unit's minorities but margins fell on competitive pressure and the recent implementation of termination rate cuts.
Italy's leading telecoms operator said in a statement that net profit was EUR744 million in the first three months of the year, up from EUR656 million in the same period the previous year.
The figure was better than the EUR710.7 million average forecast of nine analysts polled by Dow Jones Newswires.
Revenue grew 6.5% to EUR7.48 billion from EUR7.02 billion. That beat the EUR7.42 billion expected by analysts and was driven by growth at the company's international broadband operations and at its Brazilian mobile unit, which offset virtually flat sales at its domestic fixed and mobile units.
Earnings before interest, taxes, depreciation and amortization grew slightly to EUR3.3 billion from EUR3.28 billion a year earlier. The EBITDA margin fell to 44.6% from 46.8% last year, due to increasing competitive pressure and the implementation of the recent termination rate cut.
For the same reason, operating profit fell 2.5% to EUR1.94 billion from EUR2.03 billion a year before.
In March, Telecom Italia cut its previous three-year targets and projected that its EBITDA, EBIT and sales should grow in concert by 3% to 4% through 2008.
However, these new targets are threatened by competition from Hutchison Whampoa's unit 3, which has amassed a large number of customers in Italy by offering handset subsidies and promotions.
A further threat is posed by competitors such as Fastweb, BT Group's Italian unit, Albacom, which are battling for Italian corporate clients.
Telecom Italia's net debt fell to EUR39.04 billion at the end of March, from EUR43.5 billion a year ago due to the disposal of non-strategic assets after the EUR14 billion buyout of TIM minorities.
Telecom Italia intends to cut its net debt to EUR33.5 billion in 2007, but has promised to keep up with its generous dividend policy.
For 2005, the company proposed a 28% increase of its dividend per ordinary share, in a move which put its credit rating under pressure.
1547 GMT Monday Telecom Italia's shares stood little changed at EUR2.27, in a firmer broader market.
Company Web site: http://www.telecomitalia.it
-By Serena Saitto, Dow Jones Newswires; +39 02 58219907, serena.saitto@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 8th May 2006
Posted to: www.cellular-news.com/story/17285.php