Telecom Italia - The Board of Directors examine the preliminary results for the first half of 2002

07/25/2002 - 00:00 PM

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THE TELECOM ITALIA GROUP

Margins growth accelerates in the second 
quarter of 2002.  The EBITDA is up by approximately 7.7% (+253 million Euros) on the first quarter figures  and the gross operating income by approximately 11.2% (+195 million Euros).

PROFITABILITY GOES UP:  DEBT COMES DOWN

· A Billion Euros in cash cost efficiency by the end of 2002
· Revenues:    14,988 million Euros (+1.7% as against the first half of 2001)
· EBITDA:  6,801 million Euros (+3.2% as against the first half of 2001)
· EBITDA/Revenues 45.4% (44.7% in the first half of 2001)
· Operating income 3,657 million Euros (+10.1% as against the first half of 2001)
· Operating income/Revenues 24.4% (22.5% in the first half of 2001)
· Net financial indebtedness falls to 21,106 million Euros (- 836 million Euros at 31st December 2001) in line with programme objectives
· Innovative decisions for Corporate Governance

TELECOM ITALIA SpA

· Revenues:  8,430 million Euros  (-1.4% as against the first half of 2001)
· EBITDA:  3,747 million Euros  (+1.2% as against the first half of 2001)
· Operating income:  2,090 million Euros (+3.6% as against the first half of 2001)
· Net financial indebtedness falls from 16,913 million Euros (as at 31st December 2001) to 16,826 million Euros as at 30th June 2002,  discounting outlay for dividend payments worth 1,164 million Euros, net of encashed dividends

Telecom Italia´s Board of Directors met today under the Chairmanship of Marco Tronchetti Provera to examine the Group and Parent Company preliminary results for the half year ending 30th June 2002.  These will not be subject to external auditing.

The Telecom Italia Group´s preliminary results for the first half of 2002

The preliminary results for the first half of 2002 show growth when compared with the first half of 2001, mainly thanks to the improved results for the second quarter of 2002.

The main preliminary figures for the first half of the current year (compared with the same period for 2001) are as follows:

· Consolidated revenues of 14,988 million Euros, with a growth of 254 million Euros (+1.7% as against the first half of 2001);

· A Group EBITDA amounting to 6,801 million Euros, up by 210 million Euros (+3.2%) on the first half of 2001 and equalling 45.4% of revenues.  During the second quarter of 2002, the EBITDA  recorded a 7.7% increase as against the first quarter of 2002;

· Operating income amounting to 3,657 million Euros and showing a 336 million Euro growth (+10.1%) as against the first half of 2001. The Group´s operating income for the second quarter of 2002 is up by approximately 11.2% on the figures for the first quarter of 2002 (+20% as against the second quarter of 2001).

· Showing a marked improvement (- 836 million Euros) on the end of last year (21,942 million Euros) and in line with programme objectives,  net consolidated debt equals 21,106 million Euros, including dividend payments (3,247 million Euros).  Debt trends have been influenced by the continuation of the resignation programme and the related computation of transactions such as the Bouygues Telecom, Lottomatica, Mobilkom Austria assignments, the reorganisation of the real estate sector and the stop-loss and 9 Telecom assignment operation.

After the half-year end, the Group reached an understanding for bringing forward the effects of the agreement announced last December regarding the assignment of its share-holding in Auna.  The Telecom Italia Group will therefore bank a sum close to 1,805 million Euros on 1st August, to which a 193 million Euro reimbursement is to be added in relation to capital addition payments made to Auna up until 30th June 2002.  The Group will achieve a capital gain of approximately 1,100 million Euros from the transaction and therefore a positive impact on both income and debt.

The period after the half-year end also wound up the sale of Telemaco (in which Telecom Italia had a 40% shareholding) to Mirtus, a business indirectly controlled by the American real estate investment trust, Whitehall, which is promoted by the Goldman Sachs Group.  The sale is worth approximately 1 billion Euros, with proceeds for the Telecom Italia Group forecast at approximately 230 million Euros and a capital gain of 64 million Euros.  The transaction´s closing is awaited at the end of July.    Some subsequent price adjustments in favour of the three sellers are expected, depending on the financial position on such a date and the realisation value of some assets during the course of 2002.

The costs reduction programme has continued in the first half of this year.  This will allow the "cash cost" reduction objective of roughly 1 billion Euros to be achieved by the end of 2002.


Telecom Italia S.p.A.´s preliminary results for the first half of 2002

The Parent Company´s preliminary revenues equal 8,430 million Euros (-1.4%)

Amounting to 3,747 million Euros,  EBITDA records a 1.2% increase.

Telecom Italia S.p.A.´s operating income of 2,090 million Euros presents a 3.6% increase.

Net financial indebtedness comes down from 16,913 million Euros as at 31st December 2001 to 16,816 million Euros at 30th June 2002, discounting outlay for the payment of dividends worth 1,164 million Euros, net of encashed dividends.


Results for the Business Unit, Domestic Wireline, during the first half of 2002

The preliminary results for the first half of 2002 are positive in comparison with the first half of 2001 and demonstrate an acceleration in the improvement trend.

The main preliminary figures for the first half of the current year (compared with the same period for 2001) are as follows:

· Revenues:  8,399 million Euros (-0.98% as against the first half of 2001)

· EBITDA:  3,902 million Euros (+3.2% as against the first half of 2001)
· EBITDA/Revenues  46.5% (44.6% in the first half of 2001)

· Operating income  2,404 million Euros (+9.3% as against the first half of 2001)
· Operating income/Revenues  28.6%  (25.9% in the first half of 2001)


The Telecom Italia Group´s final results for the half year will be submitted on 5th September to the Company´s Board of Directors for their approval.


The Telecom Italia Group confirms that a growth in operating income at least in line with that in 2001 is expected for 2002.  Such an indication is consistent with the communication made to the market on 14th February, i.e. an average annual compound EBITDA growth of 5-5.5% for the period 2002-2004.

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Innovative decisions for Corporate Governance

Following its decision to reinforce its Corporate Governance rules by making them even more modern, efficient and in line with international best practices, Telecom Italia´s Board of Directors has furthermore approved a code of conduct for carrying out operations (including intergroup ones) with correlated parties, principally managers and auditors.  
Such a code of conduct is particularly aimed at guaranteeing real, procedural and substantial fairness and transparency in such matters whilst at the same time ensuring that the entire Board of Directors assumes full, joint responsibility for its decisions.
At the same time, internal rules have been formalised.  These establish a special procedure both for gathering more detailed information regarding operations with correlated parties, those of greater economic, financial and proprietory significance as well as atypical or unusual ones and supplying such information to the Board of Auditors, pursuant to art. 150 (1) of the T.U.F. (Unified Financial Code).
The procedures referred to above can be found in the web-site www.telecomitalia.it from 31st July 2002.

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Telecom Italia´s Board of Directors has accepted the resignation of Dr. Paolo Maria Grandi and has co-opted Dr. Pietro Modiano, Vice-General Manager of Unicredito  and Managing Director of Unicredito Banca Mobiliare, to take his place and remain in office until the next Shareholders´ Meeting.
Telecom Italia expresses its heartfelt thanks to Dr. Paolo Maria Grandi for the contribution he has made during his period in office.