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05/06/2005 - 05:45 PM

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Telecom Italia Media: The Board approves 1st Quarter Results 2005

Board approves first-quarter 2005 report, drafted for the first time in compliance with the new IAS/IFRS accounting criteria

In application of IAS/IFRS standards, TI Media’s Internet operations (Tin.it and Virgilio), which are being sold to Telecom Italia, have been entered onto the accounts as “discontinued operations”. Operational data from these businesses are no longer consolidated (revenues, EBITDA and operating income), but do contribute to the net result after tax and to the net financial position. In consequence, the operational figures for the Telecom Italia Media Group presented below essentially refer to the television business, APCom and the Buffetti Group.


First-quarter consolidated revenues amounted to €72.4 million,
on underlying growth of 8.1%

Operating income corresponded to -€31.9 million (-€17.2 million for the first quarter of 2004), after the €11.9 million impact on operating income of digital terrestrial startup operations

Net result up 8.5% to -€17.6 million
(-€19.2 million for the first quarter of 2004)

Net profit and positive net financial position forecast at year-end 2005 following the sale of the internet unit to Telecom Italia

Television Unit: dramatic rise in first-quarter 2005 revenues (up 25.8%) and gross advertising revenues (up 21.6%) compared with the first quarter of 2004
 
MTV: increase in gross advertising revenue (up 20% compared with the first quarter of 2004) outperforms the market

LA7: turnover (32.8%) and audience (2.5%) up on the first quarter of 2004 – the best quarter in recent years

560,000 prepaid smartcards distributed for digital terrestrial football broadcasts as at March 31, 2005; sales trend continues to improve

Buffetti: positive trend continues, with EBITDA of €5.1 million (in line with the first quarter of 2004), and net financial borrowings reduced to €22.7 million (€24.2 million at December 31, 2004)

Today the Telecom Italia Media (Telecom Italia Group) Board of Directors, chaired by Riccardo Perissich, examined and adopted the Report on results as of March 31, 2005.

Introduction

Telecom Italia Media now drafts its quarterly reports, consolidated half-year report and consolidated annual report in compliance with IAS/IFRS accounting standards. Individual company accounts will be adopting the same standards starting with the 2006 financial year. In order to foster greater clarity in the presentation of the Group accounts, appropriate adjustments and reclassifications have been made to the income, assets and finance data for 2004, in compliance with IAS/IFRS accounting standards and principles; this is to make it easier to compare last year’s figures with the first-quarter 2005 results.
Telecom Italia Media’s €950 million sale of Tin.it and Virgilio has enabled the company to raise the funding it needs to develop its core media business, particularly digital terrestrial television. Digital terrestrial television offers significant growth prospects and requires major investments in infrastructure and content. Under this framework, LA7 recently made deals to take over the nationwide Elefante TV broadcaster, and acquire TV installations and frequencies from license-holder Delta TV.

Telecom Italia Media Group results for the first quarter of 2005

Revenues amounted to €72.4 million, down slightly (2.5%) on the first-quarter 2004 figure of €74.3 million. Organic growth corresponded to 8.1% excluding the negative impact of changes to the consolidation area following the disposal of minor equity interests. The television Unit posted revenue growth of 25.8%.

Telecom Italia Media’s first-quarter 2005 profitability was penalized by digital terrestrial television startup operations, which had a -€11.9 million impact on operating income (compared with a €1.4 million impact on the first quarter of 2004). In consequence, EBITDA for the period corresponded to -€22.2 million (-€12 million for the first quarter of 2004), and operating income amounted to -€31.9 million (-€17.2 million for the first quarter of 2004).

The net result for the first quarter of 2005 posted an 8.5% improvement to -€17.6 million (-€19.2 million for the first quarter of 2004). As stated earlier, this figure benefited from the performance of soon-to-be discontinued Internet operations (a profit of €6.9 million), and by taxes set aside after inclusion under the Telecom Italia consolidated tax return (€8.6 million).

First-quarter investments amounted to €15.3 million: €10.8 million in rights acquisitions, €2.9 million in digital terrestrial development, and €1.6 million in other investments.

Net financial borrowings at March 31, 2005 corresponded to €199.7 million (€170.7 million at December 31, 2004). The increase in borrowings may essentially be ascribed to the investments outlined above (€15.3 million) in digital terrestrial television and in new content necessary to drive audience growth, in addition to cash flow (€17.6 million); these items were partially offset by €3.9 million in proceeds from the disposal of equity holdings.

FIRST-QUARTER 2005 RESULTS BREAKDOWN BY BUSINESS UNIT

TELEVISION

Total Television Unit revenues amounted to €33.2 million, after registering a significant 25.8% increase compared with the corresponding period in 2004 (€26.4 million). Revenues were boosted by a 21.6% rise in gross advertising revenues compared with the first quarter of 2004. Operating income of -€28 million (-€14.5 million for the first quarter of 2004) was impacted predominantly by the higher investments in content necessary to drive audience growth, in addition to the digital terrestrial startup operations cited earlier, which had an €11.9 million effect on operating income (€1.4 million in the first quarter of 2004). Excluding these items, operating income amounted to -€16.1 million (compared with -€13.1 million for the first quarter of 2004).

LA7’s revamp and new content plan, launched last autumn, have achieved significant audience successes. The channel’s average audience share during the first quarter of 2005 was 2.5% (up 15% on the 2.2% figure for the first quarter of 2004). This is the broadcaster’s strongest first-quarter result in recent years. Revenues consequently rose to €19.1 million (up 32.9% compared with €14.4 million for the first quarter of 2004), while gross advertising revenues rose €23.3 million (up 22.8% compared with the first quarter of 2004). In addition to confirming the broadcaster’s tried and tested favourites, new programming has been well received. The network has continued with its tradition of quality international sports coverage, offering the UEFA Cup and Six Nations rugby. This is in addition to the launch of digital terrestrial football coverage, for which sales trends continue to be positive and 560,000 prepaid smartcards were distributed by the end of the quarter.

MTV Italia consolidated and strengthened its position on the Italian advertising market, confirming its status as the number one youth television brand with revenues of €15.8 million (up 22.2% compared with the same period in 2004) and gross advertising revenues of €16.2 million, up 20% on the first quarter of 2004. Advertising revenues significantly outperformed the market as a whole (around 4% according to Nielsen Media Research). MTV Italia is now a multichannel, multimedia network spanning TV, the Internet, satellite and live events, and has recently launched advanced content for mobile phones. The network’s free television market content and commercial position continue to be enhanced, while it expands onto new, non-traditional markets. MTV Italia is also continuing to produce innovative content: on March 21 the network launched its new season “blooming days” initiative, with new content and a new look for the network.

OFFICE PRODUCTS & SERVICES (BUFFETTI)

First-quarter 2005 revenues for the Unit amounted to €37.2 million (€38.2 million for the first quarter of 2004). The difference may principally be ascribed to lower sales of office automation and telephony products and accessories. Despite this decrease, the Unit continues to register a positive trend: EBITDA remained in line with the first quarter of 2004 at €5.1 million, while net financial borrowings decreased to €22.7 million, from €24.2 million at December 31, 2004.

SOON-TO-BE DISCONTINUED OPERATIONS

INTERNET

Internet Business revenues (the Tin.it division and Matrix SpA-Virgilio) for the first quarter of 2005 amounted to €78.4 million, up 4.8% compared with the first quarter of 2004. EBITDA amounted to €17.8 million, up 77.2% compared with the first quarter of 2004.

Tin.it registered first-quarter 2005 revenues of €69.7 million, up 4.5% compared with €66.8 million for the first quarter of 2004. EBITDA reached €16.5 million, up 59.7% compared with the first quarter of 2004. Operating income amounted to €11.8 million, compared with €5.1 million for the corresponding period in 2004. Wi-Fi network rollout continued during the quarter: at March 31, the company supplied 785 hotspots, of which 673 were active and 112 in the process of activation. ADSL customer numbers rose to 320,000, up 72% compared with the first quarter of 2004.

Matrix, which owns the Virgilio Portal and search engine, posted first-quarter 2005 revenues of €10.2 million, a 7.9% improvement on the first quarter of 2004. EBITDA amounted to €1.3 million, a strong improvement on the first-quarter 2004 figure of -€0.3 million, while operating income reached break even, compared with a €1.7 million loss for the first quarter of 2004. At March 31, 2005 Virgilio tallied approximately 15 million unique browsers (up 5% compared with March 31, 2004) and 2.3 billion pageviews (up 18% compared with March 31, 2004).


MANAGEMENT OUTLOOK

The company is set to earn €950 million from the sale of its Internet operations to Telecom Italia, and book a significant capital gain. In consequence, the outlook for 2005 is for a positive result and an improvement in the company’s net financial position.

§§§

The Board of Directors updated the company’s articles of association to reflect recent rule changes introduced for Regulated Markets. In future, shareholders shall no longer be required to produce documentation confirming their participation in the centralized share management system in order to attend Shareholders’ Meetings; a letter from an authorized broker shall suffice.

 

Rome, May 6, 2005


 

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