Telecom Italia Media: The Board of Directors Approves Results at September 30, 2007

11/07/2007 - 00:00 PM

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REVENUES CONTINUE TO INCREASE: €178.3 MILLION; +31.4% (€135.7 miLlion FOR 9M 2006), BOOSTED BY THE GROWTH IN ADVERTISING SALES AND DIGITAL TERRESTRIAL TV

SHARP RISE IN ADVERTISING SALES OF LA7 FREE TO AIR IN q3: +27.3% (+19.3% IN 9M 2007)

MTV ADVERTISING SALES INCREASED 13.5% IN Q3 (+11.1% IN 9M 2007) THANKS TO THE CONTRIBUTION OF ALL PLATFORMS

REVENUES From DIGITAL TERRESTRIAL TELEVISION INCREASED 145.6%; €36.1 miLlion (€14.7 miLlion FOR 9M 2006)

ONGOING REDUCTION OF OPERATING LOSS: EBITDA -€37.7 million, +46.8% (-€70.9 million for 9m 2006), EBIT -€83.7 million, +24.7%     (-€111.2 million for 9m 2006)

NET RESULT: -€65.8 million (-€78.1 MIlLION for 9m 2006)

NET DEBT: €188.1 million (€128.2 million at december 31, 2006)

MTV 10th anniversary: MTV day attracts 140,000 young people in Milan and Rome

Multimedia: 3 new satellite channels launched — MTV GOLD, MTV PULSE and VH1 — completing MTV Italia music network

Positive results for TI Media as Content Competence Center of the Telecom Italia Group

Milan, November 7, 2007 – The Board of Directors of Telecom Italia Media, chaired by Enrico Parazzini, examined and approved the Group’s results at September 30, 2007.

Consolidated revenues for the first nine months amounted to €178.3 million, up 31.4% (€135.7 million for the first nine months of 2006), boosted by the growth in domestic advertising sales (+14.9%), significantly outperforming the market (down 2.0% in the first eight months of the year — source: Nielsen), and the strong increase in revenues from the Digital Terrestrial platform mainly for the broadcasting of Serie A football matches.

EBITDA was -€37.7 million, with a marked improvement compared to the first nine months of 2006: + 46.8% (-€70.9 million for 9M 2006). This result was due both to Free-to-Air analogue activities amounting to €7.7 million, boosted by advertising sales, and the growth in profitability of Digital Terrestrial TV, which as well as the increase in revenues also benefited from a more effective management of the platform and cost rationalization policies adopted for the Free-to-Air digital channels.

EBIT, after depreciation and amortization for the period, was -€83.7 million, a 24.7% improvement (-€111.2 million for 9M 2006). The impact of depreciation and amortization on operating profitability for the first nine months of 2007 was €46.0 million. They are mostly (€21.5 million) linked to investments made on DTT, whose return shifted due to the well known postponement of the switch off and the greater use of TV rights for programs in the first half of the year.

Net result of the Parent Company, after the contribution of discontinued operations was -€65.8 million (-€78.1 million for 9M 2006).

Net debt amounted to €188.1 million, up €59.9 million compared to December 31, 2006 (€128.2 million). The change was mainly due to industrial investments for the period (€54.5 million) and the requirements for operating activities of the nine months (€53.8 million), partly offset by the collection of the receivable arising on the National Tax Consolidation (€48.4 million). Compared to June 30, 2007, net financial debt grew €23.0 million.

Industrial investments amounted to €54.5 million in the first nine months of 2007 (€65.1 million for 9M 2006). The decrease in investments was mainly due to the completion of the development phase of digital networks.

Results by Business Unit

Free to Air Television

The Free to Air Business Unit recorded particularly positive results in the first nine months of 2007: revenues were €116 million, improving 15.8% (€100.2 million for 9M 2006). A significant improvement was also reported in terms of profitability (EBITDA was -€18.7 million, +29.2%, and EBIT was -€41.9 million, +12.0%). The positive performance in terms of revenues was achieved mainly thanks to the growth of advertising sales in Italy (+13.9%), which outperformed the market.

In detail:

La7 revenues, amounting to €70.3 million, showed a sharp increase (+19.8% compared to €58.7 million for 9M 2006) thanks to the significant contribution of advertising sales, which grew 27.3% in Q3 2007 (+19.3% in 9 months). The positive sales result led to an increase in profitability for the period, improving both EBITDA (+€4.0 million compared to the first nine months of 2006; +14.0%), and EBIT (+€2.1 million compared to the first nine months of 2006; +4.6%). 

In the first nine months of 2007, La7 maintained its 3% average daily share, with an increase in the afternoon slot (+21% over the same period of 2006), reaching a 4.6% average share. Moreover, overall coverage increased, with total contacts reaching 47.6 million in the first nine months of the year.

Sport continues to contribute highly to La7 success: the Six Nations Rugby Championship recorded an average share of 5.5%, the America’s Cup (the first great event broadcast on all the platforms of the Telecom Italia Group, with 29 million total viewers) reached 6.9%, the World Superbike Championship reached 4.8%, and the 13 Grand Prix’s broadcast recorded almost 20 million viewers. Football also recorded good results, with live broadcasting of the Uefa Cup, and matches of Italy’s national team in Germany, with an average 5.5% share.

In the News sector, La7 maintained its focus on news and politics, offering also a summer version of both Omnibus and Otto e Mezzo, two of the most successful shows, which have now resumed their autumn programming, along with other shows.
September saw the start of the autumn season, with great comebacks as well as novelties. Maurizio Crozza is back with Crozza Italia Live, with a 3.0% share in its first episode. La7 TG (news) confirms its focus on the most significant political and social events in Italy and reports excellent results (10.8 million contacts for its 8:00pm edition).
In October and November, Daniele Luttazzi with Decameron, and Gianni Boncompagni with Bombay, chose La7 for their TV comeback. La7 broadcast, for the first time on Free to Air TV, A Clockwork Orange, with an average share of 4.6% reaching over 4.2 million contacts.
The event show of the year, “Il Sergente” by Marco Paolini, was also successful. It was not interrupted by commercials, and recorded an average share of approximately 6.0%, reaching over 1.2 million viewers.
This success demonstrates how television can reach a very extensive public, when the choice of content is driven by quality and a view to promoting culture. It can be an effective vehicle for disseminating information on important works, which belong to the entire country. 

MTV revenues amounted to €51.2 million, up 12.0% compared to the first nine months of 2006 (€45.7 million). In 9M 2007, MTV consolidated its position thanks to the growth of advertising sales in Italy (+5.6%) and internationally (+33.4%); the overall value of MTV advertising sales distributed on all platforms grew by 11.1%. Both EBITDA (+€3.6 million) and EBIT (€3.5 million) improved compared to the same period of 2006.
These positive results were reached in the 10th year of operations of MTV in Italy. This anniversary was marked by several specific events, which culminated in the not-to-be-missed MTV Day. This year, MTV Day offered a double event, with two simultaneous concerts in Rome and Milan. This free event gathered 140,000 young people from all over Italy. 123 Italian artists and the most popular MTV's VJs recorded more than 6 million TV contacts and 83,000 web streaming requests.    

Multimedia

In the first nine months of 2007, growth continued for the multimedia business unit, which reached revenues of €20 million, up 34.2% compared to the same period of 2006 (€14.9 million). The positive result was achieved on all platforms also thanks to advertising sales, which increased 41.2%. The good performance of this business unit is confirmed also by the positive EBITDA results (€7.0 million compared to €4.8 million for 9M 2006; up 45.8%) and EBIT (€6.0 million, compared to €3.9 million for 9M 2006; +53.8%) The multimedia operations of the Telecom Italia Media Group include satellite broadcasting and interactive events, as well as the new activities of the Content Competence Center for Telecom Italia.

In the Satellite broadcasting sector, with the MTV, MTVHits, MTVBrand:New channels and the new MTV Pulse, MTV Gold and VH1, TIMedia confirms its leading position in the music segment, whereas Comedy Central and Nickelodeon consolidated the Company’s presence in the entertainment and children’s programs. All of the Interactivechannels grew in terms of both unique users and pageviews. The first results of the Content Competence Center, whichstarted its activities in April, were positive and contributed €2.3 million to the increase in revenues for the first nine months of 2007.

Digital Terrestrial Television

Revenues for the first nine months of 2007 more than doubled, reaching €36.1 million and growing 145.6% (€14.7 million in the first nine months of 2006). Profitability also improved significantly both in terms of EBITDA (-€13.7 million compared to -€35.7 million for 9M 2006; +61.6%) and EBIT (-€35.2 million compared to -€53.5 million for 9M 2006; +34.2%).
This performance is attributable both to the increase in pay-per-view revenues and margins (thanks to the commercial development of the offering “La7 Cartapiù”), and the cost rationalization policy adopted for the Free-to-Air digital channels (La7 Sport and QOOB), as well as the growth in sales of digital band by the Network Operator.

The Digital Terrestrial sales offering “La7 Cartapiù”, also for the new Serie A football season, allows the purchase of football matches for 10 teams out of 20, including the Top teams “La7 Cartapiù” package (for which users can buy both home and away matches). With reference to football, the programming was expanded to include international events, such as the Uefa Cup (for some teams still to be defined) and the best of other countries’ championships. In the 2007-2008 season, non-football content was also expanded and since October, a series of cult Japanese horror movies, motor shows, cartoons, golf events and edutainment shows have been introduced. The interactive multimedia “La7 Cartapiù” platform, which allows children to learn English through amusing interactive quizzes, is already operating. “La7 Cartapiù” allows users to buy single events, event packages for the September-June period, or for shorter periods (one month). 

In the first nine months of 2007, QOOB TV — the multi-media platform broadcasting on television, the Internet and mobile phones the best of cartoons, films, graphic design, and music, maintained a constant traffic of approximately 210 thousand unique users. Appreciation of content is on the rise, as shown by an increasing number of videos copied and pasted on third-party websites. Moreover, new initiatives have been launched, which have resulted in increased advertising sales (including an agreement with the Istituto Europeo di Design).

The Network Operator (TI Media Broadcasting) continued to perform well. During the first half of the year, a contract was finalized to acquire frequencies in Sicily for a total amount of €15.9 million, which allowed the company to increase its coverage in the region. Following this transaction, the national coverage of the 2 Digital Multiplexes increased to 87.2% and 75%, respectively. Revenues from band sales to third parties increased over 50% compared to the same period of 2006.
 
News

Revenues of the “News” business area (APCom press agency) amounted to €7.3 million for the first nine months of 2007, up 5.8% compared to the same period of 2006, with a more marked increase by 11% for the New Media segment. EBITDA was virtually stable compared to the first nine months of 2006, despite the increase in operating costs, whereas EBIT improved 4.4% as a result of a decrease in depreciation and amortization.
At the end of July, a new editorial project was launched (the first APCom project adopting an advertising business model) — e-Press, afternoon paper edition (at 5:00pm), with free distribution to 4 and 5-star hotels. Moreover, the integration of the multimedia desk continued through the inclusion of “new journalism figures” and, consequently, the launch of Notiziario Multimediale (multimedia news).

§§§

The Board of Directors ascertained the existence of all the conditions called for by article 18 – quater of Market Regulation – as a quoted company controlled by Telecom Italia S.p.A., and subject to the direction and coordination of the latter. In detail, the following requirements were identified: 

fulfillment of advertising obligations in accordance with article 2497-bisC.C;

autonomy of negotiation in relations with customers and suppliers;

accountability to company interests in centralized treasury relations with Telecom Italia;

presence on Board of Directors consisting of 13 directors, including 8 independent directors, in accordance with the criteria set out in decree 58/98 and the conditions of the code of self regulation;

The Board of Directors, in accordance with article 18.5 of the company bylaws referring to the preparation of company accounts’ documents, nominated  Mr. Paolo Serra to head the Company’s Administration and Control function.

The Board of Directors also verified the suitability of the powers and resources at the disposal of the manager for the dispatching of his tasks.
The manager for the preparation of the Company’s Accounts Documents, Paolo Serra declares in accordance with paragraph 2 of article 154 bis of the Testo Unico della Finanza (Financial Law) that the accounts information contained in this press release corresponds to the accounts’ documents, books and records.

§§§

The Group’s results as of September 30, 2007 will be presented to the financial community today during a conference call, starting at 3:00pm (CET). Journalists are invited to follow the conference call at the number: + 39 06 33 485 042. For those who are unable to follow the live conference call, a recorded version of the presentation will be available for 48 hours at the number: +39 06 334 843 (access code 167898#).

Enclosures (file .pdf, 180 Kb)