Board of Director's meeting approves quarterly statements

05/11/2001 - 00:00 PM

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Gruppo Telecom Italia
- Revenues: 7.55 bn euros, +7.3%
- Ebitda: 3.51 bn euros, +4.7%
- Adjusted for divestments and seasonal factors: revenues +17%, ebitda +12%
- Pre-goodwill net income: 689 mn euros, +3%
- Net income: 386 mn euros, -35.6%
- Net financial indebtedness: 22.41 bn euros

- Tiws: ebitda up and tariffs down (-23%)
- Tim: ebitda margin rises to 53.3% 48 million customers worldwide
- Seat pg: isp operations towards break even
- International operations: revenues up (43.3%), ebitda up (17.6%)
- Productivity up sharply (+3.4%)

2001 budget objectives confirmed:
- Revenues and ebitda up 14%
- Indebtedness stable

During today´s meeting, chaired by Roberto Colaninno, the Telecom Italia Board of Directors approved the financial statements to 31 March 2001.

Telecom Italia Group first quarter 2001
In the first quarter of the year, Telecom Italia Group gross revenues grew by 7.3% to 7.55 bn euros (14.622 bn lire), compared to 7.04 bn euros in the first quarter of 2000 (13,632 bn lire).

Net of amounts due to other telecommunications operators, revenues increased by 6.4% to 7.74 bn euros (13,056 bn lire).

Consolidated EBITDA in the first quarter increased by 4.7% to 3.51 bn euros (6,798 bn lire). In the first quarter of 2000 EBITDA amounted to 3.35 bn euros (6,491 bn lire).

These figures do not take into account adjustments arising from divested businesses, the effects on first quarter 2000 figures of the delayed introduction of fixed-mobile tariffs, and seasonal factors affecting Seat business.

Taking these factors into account, overall Group revenues posted growth of around 17% and Group EBITDA grew by around 12%, both maintaining substantially in line with budget objectives for 2001.

Consolidated operating income for the first quarter of 2001 was 1.8 bn euros (3,476 bn lire), a fall of 3.6% with respect to the same period in 2000 (1.86 bn euros; 3,604 bn lire). This was due to write-downs for goodwill resulting from acquisitions undertaken by subsidiaries and affiliated companies, (Seat PG and international operations) for a total of 250 mn euros (484 bn lire), Net of goodwill, operating income increased by 7.7%.

Net pre-tax income for the first quarter of 2001 amounted to 577 mn euros (1,118 bn lire), a decrease of 30.1%.

Net income post minorities, amounted to 386 mn euros (748 bn lire), a decrease of 35.6% compared to the first quarter 2000 (600 mn euros, 1,162 bn lire).

This result was significantly conditioned by financial charges, losses on participations and goodwill amortizations.

Specifically, write-downs reported in the first quarter, totalling 218 mn euros (423 bn lire), relative amongst other aspects, to Turkey (72 mn euros), Stream (49 mn euros) and Auna (44 mn euros).

Goodwill amortizations, from acquisitions of subsidiaries and affiliated companies, amounted to 329 mn euros (638 bn lire, +296%).

Net pre-tax income adjusted to exclude these goodwill charges, amounted to 907 mn euros (1,756 bn lire), in line with the previous year; Net income post minorities adjusted to exclude these goodwill charges, amounted to 689 mn euros (1,335 bn lire), a growth of 3% compared to the first quarter of 2000.

Considering, apart from goodwill amortizations, investment for development, (245 mn euros, 474 bn lire) deriving from acquisitions made during the course of 2000, overall costs generated by the Group´s development plans are estimated in the first quarter of the year, at around 700 mn euros (about 1,350 bn lire).

Net financial indebtedness at 31 March 2001 was 22.41 bn euros (43,391 bn lire), compared to 19.03 bn euros (36,846 bn lire) at the end of 2000. The 17.7% increase in this figure derived exclusively from international acquisitions in Turkey, Brazil and Chile, and from consolidation of the debt related to these operations.

The increase in the indebtedness in the first quarter does not alter budget indications for 2001, which allow for indebtedness remaining substantially at the same levels as at the end of 2000.

First quarter 2001 investments totalled 4.79 bn euros (9,278 bn lire): 2.84 bn euros (5,515 billion lire) of an industrial nature and 1.94 bn euros (3,763 bn lire) of a financial nature.

Cash flow (profits+depreciation) over the period amounted to 2.2 billion euros (4,255 bn lire). In the first quarter of 2000, cash flow stood at 2.19 bn euros (4,249 bn lire).

Group personnel at 31 March 2001 numbered 119,183, an increase of 4,514 resulting entirely from expansion of the consolidation area.

First quarter 2001 performance of the Group´s principal business units
Highlights of first quarter 2001 operations:

- extremely impressive EBITDA results achieved in fixed telephony (Telecom Italia Wireline Services), up by 6% over the quarter 2000 compared to the quarterly average (+0.5% compared to the first quarter 2000);
- excellent results reported by TIM at consolidated level in terms of revenues (+9.6%) and EBITDA (10.7%);
- strong growth in international wireline and fixed-mobile telephony operations: a 43% increase in revenues and an 18% increase in EBITDA, arising principally from extension of the consolidation area;
- the Seat Pagine Gialle Group achieved break-even in its Internet Service Provider operations conducted through Tin.it;
- productivity levels continued to rise throughout the Group, up by 3.4% on figures for the first quarter of 2000. Specifically, the improvement in domestic mobile telephony was 7%, while a 6% increase was recorded in wireline telephony, despite a fall in average call traffic prices of, respectively, 10% and 23%.

Telecom Italia Wireline Services (TIWS)
Telecom Italia Wireline Services (TIWS) reported its strongest EBITDA results in 12 months. During the first quarter of 2001 EBITDA registered 8% growth in comparison to the last quarter of 2000, and 6% growth with respect to the quarterly average for last year.

TIWS EBITDA for the first quarter posted a 0.5% rise over the same period in 2000. Figures for last year benefitted from the fixed-mobile tariff system in place prior to the price reductions imposed by the Regulatory Authority, and were achieved in a less competitive market scenario.

This performance was achieved despite the considerable reduction during the first quarter of 2001 compared to the same period in 2000 in average per-minute prices for voice call traffic in the retail market (-23%). This was partially offset:

- by a significant increase in wireline traffic volumes (+8%) and data transmission (+9%)
- by major cost reductions (-250 mn euros, 486 bn lire) exceeding 11%.

Telecom Italia Wireline Services revenues for the first three months of 2001 amounted to 3.91 bn euros (7,565 bn lire), down by 5.8%. This may be wholly ascribed to the aforementioned reduction in average prices, and was equivalent to 515 mn euros (almost 1,000 bn lire).

The EBITDA margin improved by 3 percentage points, from 45.3% in the first quarter of 2000 to 48.3% in the first quarter of 2001.

In the wake of the success of the company´s Teleconomy offering, which had garnered more than 2.8 million customers by April, overall market share at the end of March 2001 was equal to 86%.

Telecom Italia Mobile
TIM Group revenues amounted to 2.40 bn euros (4,640 bn lire), recording growth of 9.6% with respect to the pro forma figures for the same period in 2000.

Consolidated EBITDA registered a 10.7% increase to 1.18 bn euros (2,279 bn lire). The EBITDA margin continued to rise significantly, reaching 49.1% against 48.6% in the first quarter of 2001.

TIM Group consolidated net income grew by 11.5% to 408 mn euros (790 bn lire), even after the cost of goodwill write-downs, equal to 55 mn euros (106 bn lire).

At the end of March, the TIM Group reported a total of more than 48 million customers, inclusive of Telecom Italia Group wireless lines, an increase of more than 3 million on the end of 2000.

TIM Spa revenues in the first quarter of 2001 totalled 1,95 bn euros (3,772 bn lire), a rise of 6.5%. Revenues from services posted an increase of 10.6%. The impact of lower prices was more than offset by greater traffic in minute terms (+19.3%).

During the first quarter of 2001, TIM confirmed its leadership in the value added services (VAS) market, for which revenues grew by 70.5% to account for around 6.8% of traffic revenues (4.4% in the first quarter of 2000).

TIM SpA EBITDA amounted to 1,04 bn euros (2,010 bn lire), up 13.5%, while the EBITDA margin reached 53.3%, the highest figure recorded by any major telephony company worldwide.

TIM Spa net income was up 37.1% to 585 mn euros (1,133 bn lire).

Seat
Seat Pagine Gialle Group´s first quarter 2001 results were affected by the highly seasonal nature of the business, and are therefore only marginally indicative of final annual totals.

In the first quarter of the current year, revenues amounted to 292.5 mn euros (564.5 bn lire), and showed an increase of 122% owing principally to the input of new acquisitions.

Gross operating income amounted to 22.4 mn euros (43.3 bn lire), down 13.7%.

Pre-tax net income for the first quarter showed a loss of 68.7 mn euros (132.9 bn lire) following depreciations worth in excess of 36.8 mn euros (71 bn lire).

The Group´s Internet Service Provider turned in particularly impressive results and posted a major increase in EBITDA, up from -21 mn euros (-41 bn lire) in the fourth quarter of 2000 to 3 mn euros (6 bn lire) in the first quarter of 2001. At the end of March 2001 the company had 4.4 million Internet users, of whom 1.75 million (+27%) were active after 45 days. Average connection time increased by 40% compared to the first quarter of 2000.

International Operations
Revenues in the first quarter of 2001 from the International Operations business unit, responsible for both wireline and fixed-mobile activities, increased by 43.5% to 1.26 bn euros (2,447 bn lire), principally as a result of a larger area of consolidation.

EBITDA amounted to 369 mn euros (2,443 bn lire), an increase of 17.6%. A significant contribution to this result came from the good performance of Entel Chile, which entered the consolidation area.

Other Group activities
IT Telecom Italia, the Information Technology business unit, also returned positive EBITDA figures, which rose by 1% to 70 mn euros (136 bn lire), an increase of 0.5 mn euros (1 bn lire) despite a 5% reduction in revenues to 398 mn euros (770 bn lire).

The Satellite Services business unit reported revenues of 65 mn euros in the first quarter of 2001, 2 mn euros (4 bn lire) or 3% down principally owing to operations under the auspices of the Astrolink space consortium. This strongly affected EBITDA for the business unit, which amounted to 5 mn euros (9 bn lire), and the loss which amounted to 4.6 mn euros (9 bn lire).

TI Lab, the Group´s innovation and research business unit, reported turnover of 22.2 mn euros (43 bn lire), with a negative EBITDA of 7.7 mn euros (15 bn lire) and a loss of 12.9 mn euros (25 bn lire).

Telecom Italia SpA
Parent company revenues amounted to 4.25 bn euros (8,230 bn lire), a decrease of 4.8%.

EBITDA amounted to 1.89 bn euros (3,662 billion lire), down 6.8% with respect to the first quarter of 2000. The EBITDA margin dipped slightly from 45.4% to 44.5%. Nevertheless, isolating the effects of the change in perimeters for the exit from real estate and other minor areas (information an payroll services) the reduction of EBITDA on a pro-forma basis in the first quarter is equal to 2.7% (-52 mn euro, 100 bn lire), and it is recognizable to the margin reduction on international wholesale activities.

Operating income was equal to 1,07 bn euros (2,068 bn lire), up 2.7% or 28 mn euros (55 bn lire) with respect to the first three months of last year.

Net income was 378 mn euros (732 bn lire), a fall of 24.1% compared to the same period last year. This result was significantly affected by higher net financial charges and write-downs totalling 360 mn euros (698 bn lire).

Net financial indebtedness at 31 March 2001 amounted to 17 bn euros (32,932 bn lire), substantially unchanged with respect to the figure at the end of 2000.

First quarter 2001 investments totalled 1.44 bn euros (2,801 bn lire): 386 mn euros (2,801 billion lire) of an industrial nature and 1.06 bn euros (2,053 bn lire) of a financial nature.

Cash flow (profits+depreciation) over the first quarter of 2001 amounted to 1.19 billion euros (2,319 bn lire). In the first quarter of 2000, cash flow was 1.45 bn euros (2,808 bn lire).

Parent company personnel at 31 March 2001 numbered 65,295, a decrease of 1,246 compared to the end of 2000.

Significant events after 31 March 2001
On 3 May 2001, the Telecom Italia Extraordinary General Meeting approved the plan to convert Telecom Italia savings shares and subsequent buy back of the ordinary shares, as approved by the Board of Directors of 31 March.

On 10 April, the Company undertook bond issues for a total of 6 bn euros. These issues are targeted at refinancing debt on a medium to long-term basis, without affecting the overall size of the debt. The operation was a great success, as requests exceeded the original offer by a factor of three.

TI Lab, the Group´s research and innovation business unit, teamed up with the US Ramius Capital Group fund to form Saturn Venture Partners, a venture capital initiative operating under US law that will manage $US280 million in resources. Investors include TIM, Olivetti, Hopa, Mediobanca, Monte dei Paschi di Siena and Banca Antonveneta.

A conference call will be held on Monday 14 May at 5:30 pm. to illustrate the first quarter 2001 results to the financial community.