Telecom Italia Board of Directors examines and approves the Annual Financial Report at 31 December 2013

03/07/2014 - 07:30 AM

  • Target of Net Financial Debt less than 27 billion achieved (26,807 million euros)
  • Patuano: “Telecom Italia continues to be strongly focused on investments for thedevelopment of new networks and innovative services. For this year our financial discipline has suggested the non-distribution of dividends for ordinary shares, only paying the privileged dividend of 2.75 eurocents to the savings shareholders. In light of the signs of recovery we can already see on the market, we will be able to remunerate all shareholders again in the next financial year”
  • Consolidated Revenues of 23.4 billion euros, with an organic fall of 5.2% from 2012. In the last quarter the domestic market sees a reduction in the trend of losses in revenue
  • Group organic EBITDA of 9.7 billion euros with a reduction of 804 million euros, and an EBITDA margin of 41.6%
  • Group EBIT of 2.7 billion euros (1.7 billion in 2012), net of the impairment loss on goodwill of almost 2.2 billion euros made in June 2013. Organic EBIT of 5.2 billion euros                      
  • Results for the financial year came to 1.5 billion euros which, net of the impairment loss on goodwill, shows a consolidated loss of 674 million euros
  • The liquidity margin at the end of the year was 13.6 billion euros which allows the financial liabilities falling due to be covered for over 24 months
  • Group investments of 4.4 billion euros, of which over 3 billion in Italy, focussed on fixed and mobile ultrabroadband. TIM has achieved the widest LTE coverage in Italy with 651 municipalities reached
  • Bond buy back operation for 500 million euros
  • Supplement to the agenda  for the shareholders' meeting called for 16 April next 

                               ***

 

The economic and financial results of the Telecom Italia Group for the 2013 financial year and the previous year's results to which they are compared have been prepared according to the International Accounting Standards issued by the International Accounting Standards Board and homologated by the European Union (defined as "IFRS").

In the preparation of the consolidated Financial Statements and the separate Financial Statements for the year 2013 Telecom Italia applied accounting standards consistent with those of the previous financial year, except for the application of new Standards/Interpretations adopted from 1 January 2013 which had no impact on the consolidated Financial Statements or the separate Financial Statements at 31 December 2013 except for the effects of the prospective adoption of IFRS 13 (Fair value measurement), as stated in the attachment.

In addition to the conventional financial performance measures contemplated under IFRS, the Telecom Italia Group uses certain alternative performance measures in order to give a clearer picture of the trend of operations and the company's financial position. Specifically, the alternative performance measures refer to: EBITDA; EBIT; organic change in revenues, EBITDA and EBIT; net financial debt carrying amount and adjusted net financial debt. For further details on the meaning and content of these measures see the chapter “Alternative performance measures” in the attachment.

Note that this press release contains forward-looking statements about the Group’s intentions, beliefs and current expectations with regard to its financial results and other aspects of the Group's operations and strategies. Readers of the present press release should not place undue reliance on such forward-looking statements, as final results may differ significantly from those contained in the above-mentioned forecasts owing to a number of factors, the majority of which are beyond the Group’s control.

 

Finally, please note that the audit of the Telecom Italia consolidated and separate Financial Statements at 31 December 2013 has not yet been completed.

 

The Board of Directors of Telecom Italia met yesterday, chaired by Aldo Minucci, to review the Group results at 31 December 2013.

Telecom Italia's results for 2013, while continuing to be influenced by the fragility of the national economic context and the persistence of a strong competitive dynamic in the sector, have highlighted a trend reversal with respect to previous financial years.

The Group net financial debt, 1.5 billion euros less than the 2012 debt, is down to 26.8 billion euros allowing us to achieve the reduction goal set by the strategic plan.

Consolidated revenues stand at 23.4 billion euros, with a reduction compared to the previous year of 5.2% in organic terms. For the Domestic Business Unit the organic revenues came to 16.21 billion euros (- 9.4% compared to 2012), nevertheless highlighting in the last quarter an improvement in the revenue trend (-7.7% compared to -9.1% in the third quarter and -10.5% in the first half of 2013).

The consolidated profit for the year recorded a loss of 674 million euros, reflecting the impairment loss on goodwill for 2.2 billion euros made in the first half of the year. Without the write-down the Group profit would have been 1.5 billion euros. During the preparation of the financial statements for 2013 the Impairment Test process was repeated,  referring to the update of the Industrial Plan: said process, taking account of the signs of improvement in company performance, showed no need for additional write-downs. 

The Board of Directors, with the aim of further strengthening the company from a financial point of view and using the available resources for the innovative investments plan, has decided to propose at the next Shareholders' Meeting the non-distribution of dividends for ordinary shares. Savings shareholders on the other hand will be paid the privileged dividend, set out in the Bylaws at 2.75 eurocents per share, for a total amount of 166 million euros.

The liquidity margin as of December 2013 is 13.6 billion euros and allows the Financial Liabilities of the Group falling due to be covered for more than 24 months.

“The results of the 2013 financial year, especially the signs from the last quarter, regarding both the net financial debt reduction and the performance of the domestic market, leave us hopeful for 2014,” emphasized the CEO Marco Patuano. “After having taken on, while not agreeing to it, the price war on the mobile market and having helped to bring the competition back to the level of the quality of the networks and services, we close the year leader once again in terms of revenues. Thanks to strong investments in new generation technologies, we are in a position to better respond to the growing demand for innovative and converging services. In fact we already cover 42 cities with optical fibre and 651 municipalities with the fourth generation mobile. In Brazil too, we intend to fully seize on the growing demand for data traffic, continuing to invest in infrastructures. We have decided to further strengthen the company's asset structure and to continue to invest in the networks. This is also why, at the Shareholders' meeting we will propose not distributing dividends to ordinary shareholders, but paying the statutory coupon to savings shareholders. The gradual recovery of the domestic market will allow us to remunerate all our shareholders again in the next financial year”.  

MAIN VARIATIONS TO THE CONSOLIDATION AREA

The following changes to the consolidation area occurred during the 2013 financial year:

•   Sofora  - Telecom Argentina group: on 13 November 2013 the Telecom Italia Group accepted the offer to purchase its entire controlling shareholding of the Sofora  - Telecom Argentina Group. As a result the shareholding has been classified under Discontinued Operations/Non-current assets held
for sale. Pursuant to IFRS 5 (Non-current assets held for sale and Discontinued operations), the economic results of the Sofora-Telecom Argentina group for the 2013 financial year, and for the corresponding period provided for comparison are reported in a specific item in the separate income statement called "Profit (loss) from Discontinued operations/Non-current assets held
for sale", while the financial effects are reported in two separate items in the statement of financial position.

•   MTV-Media Group: on 12 September 2013 Telecom Italia Media completed the sale of 51% of MTV Italia S.r.l. and its wholly owned subsidiary MTV Pubblicità S.r.l.. As a result, these companies have been excluded from the consolidation perimeter.

•   La7 S.r.l. - Media: on 30 April 2013, after having received the authorisations provided for by the applicable regulations, Telecom Italia Media completed the sale of La7 S.r.l. consequently the company left the consolidation area.

The following changes occurred in 2012:

•  Matrix - Other assets: the company was sold on 31 October 2012, and it consequently left the consolidation area.

TELECOM ITALIA GROUP

Revenues for the 2013 financial year totalled 23,407 million euros, a fall of 9.1% from the 2012 figure (25,759 million euros); the 2,352 million euro reduction is substantially attributable to the Domestic (-1,709 million euros) and  Brazil (-532 million euros) Business Units; the Brazil BU in particular was affected by the weak exchange range, which saw the Brazilian real fall over 10% against the euro, compared to 2012 (in terms of mean rates).

The organic change in consolidated revenues decreased by 5.2% (-1,297 million euros), calculated excluding:

  • the effect of foreign exchange rate fluctuations of -945 million euros, mainly regarding the Brazil Business Unit (-935 million euros);
  • the effect of changes to the consolidation area (-100 million euros) following the sale of Matrix S.p.A. (Other Assets) on 31 October 2012 and La7 S.r.l. (Media) on 30 April 2013 and MTV Italia S.r.l. and its fully-owned subsidiary MTV Pubblicità S.r.l. (Media) on 12 September 2013;
  • a reduction in revenues for the 2013 financial year of 32 million euros due to settlements and composition agreements with customers and other operators. There was a similar reduction in revenues in the 2012 financial year, totalling 22 million euros

Revenues, broken down by business unit, are as follows:

(million euros)

2013

2012

Changes

 

 

% of total

 

% of total

absolute

%

% organic

 

 

 

 

 

 

 

 

Domestic

16,175

69.1

17,884

69.4

(1,709)

(9.6)

(9.4)

Core Domestic

15,269

65.2

16,933

65.7

(1,664)

(9.8)

(9.8)

International Wholesale

1,263

5.4

1,393

5.4

(130)

(9.3)

(8.7)

Brazil

6,945

29.7

7,477

29.0

(532)

(7.1)

6.2

Media, Olivetti and Other Assets

389

1.7

564

2.2

(175)

 

 

Adjustments and eliminations

(102)

(0.5)

(166)

(0.6)

64

 

 

Consolidated Total

23,407

100.0

25,759

100.0

(2,352)

(9.1)

(5.2)

EBITDA was 9,540 million euros, down 985 million euros (-9.4%) from the 2012 financial year, with an EBITDA margin of 40.8% (40.9% in 2012). Organic EBITDA was 9.746 million euros and dropped 804 million euros (-7.6%) from the previous year; the EBITDA margin also fell by 1.1 percentage points, from 42.7% in 2012 to 41.6% in 2013.

The following table shows a breakdown of EBITDA and EBITDA margin by business unit:

(million euros)

2013

2012

Changes

 

 

% of total

 

% of total

absolute

%

% organic

 

 

 

 

 

 

 

 

Domestic

7,746

81.2

8,676

82.4

(930)

(10.7)

(9.8)

% of Revenues

47.9

 

48.5

 

 

(0.6) pp

(0.2) pp

Brazil

1,812

19.0

1,996

19.0

(184)

(9.2)

2.7

% of Revenues

26.1

 

26.7

 

 

(0.6) pp

(0.9) pp

Media, Olivetti and Other Assets

(21)

(0.2)

(139)

(1.3)

118

 

 

Adjustments and deletions

3

(8)

(0.1)

11

 

 

Consolidated Total

9,540

100.0

10,525

100.0

(985)

(9.4)

(7.6)

% of Revenues

40.8

 

40.9

 

 

(0.1) pp

(1.1) pp

EBIT was 2,718 million euros (1,709 million euros in 2012) and has been affected by the impact of the 2,187 million euro goodwill impairment attributed to the Domestic Business Unit (4,121 million euros of impairment in 2012).

Organic EBIT was 5,208 million euros, down 796 million euros (-13.3%) from the 2012 financial year, with a margin of 22.2% (24.3% in 2012).

The consolidated net result was a loss of 674 million euros, excluding the impact of the impairment loss on goodwill, the result for 2013 would have been a profit of 1,513 million euros.

Capital expenditure totalled 4,400 million euros in the 2013 financial year, 239 million euros less than in 2012, broken down as follows: 

(million euros)

2013

2012

Change

 

 

% of total

 

% of total

 

 

 

 

 

 

 

Domestic

3,027

68.8

3,072

66.2

(45)

Brazil

1,349

30.7

1,500

32.3

(151)

Media, Olivetti and Other Assets

24

0.5

67

1.5

(43)

Adjustments and deletions

Consolidated Total

4,400

100.0

4,639

100.0

(239)

% of Revenues

18.8

 

18.0

 

0.8 pp

Specifically:

  • Capital expenditure by the Domestic Business Unit remained largely in line with the previous financial year: the increase for the advancement of plans to build out new generation networks (LTE and fibre network) was offset by the reduced requirement for delivery of new plants, due to the commercial slowdown in Fixed-line access;

  • The Brazil Business Unit reported a fall of 151 million euros from the 2012 figure, due to a 188 million euro loss on exchange rates; net of this exchange rate effect, investments increased primarily due to the development of infrastructure, in line with the aim of improving service quality.

Cash flow from operations  stood at 4,803 million euros , 1,233 million euros less than in the 2012 financial year. This result allowed for the payment of dividends and taxes during 2013, which amounted to 1.4 billion euros in total, as well as the coverage of requirements deriving from the financial management.

Adjusted net financial debt as of 31 December 2013 amounted to 26,807 million euros, down by 1,467 million euros compared to the value at 31 December 2012. It fell by 1,422 million euros in the last quarter also thanks to the positive generation of operating cash flow.

The liquidity margin at 31 December 2013 was 13.6 billion euros (15.65 billion euros at the end of 2012, excluding the liquidity of the Discontinued Operations) and is composed of 7.1 billion euros in cash (7.7 billion euros at 31 December 2012) and unused committed credit lines totalling 6.5 billion euros (7.95 billion euros at 31 December 2012). This margin covers the Financial Liabilities of the Group falling due to be covered for more than 24 months. The reduction in "Net cash and cash equivalents" from the 31 December 2012 figure reflects the use of cash to buy back Company bonds.

The Group headcount, excluding 16,575 relative to the Discontinued Operations, was 65,623, including 53,155 in Italy (66,381 at 31 December 2012, excluding 16,803 relative to the Discontinued Operations and including 54.419 in Italy). 

 

                                                               ***

The 2013 figures for Telecom Italia Media can be found in the press release issued after the Board of Directors' meeting on 4 March 2014.

                                                               ***

DOMESTIC

Domestic revenues fell by 9.6% in reported terms (-9.4% in organic terms) to 16,175 million euros (17,884 million euros in 2012).

With a worsening economic outlook and a market characterised by stiff competition and a sharp reduction in prices (especially on mobile early in the year), the fall in revenues was also significantly influenced by some factors of a regulatory nature

In particular, revenues were affected by the coming into force on 1 July 2013 of the new mobile termination rates (MTR), with a consequent reduction of 35% when compared to the prices for the first half of 2013, and of 61% when compared to the same period in 2012 (0.98 eurocents a minute compared to 2.5 eurocents a minute in the second half of 2012 and to 1.5 eurocents a minute in the first half of 2013), with a total loss of 364 million euros for the whole year (-429 million on Mobile Revenues) Furthermore, the recent AGCom decisions on prices for access to the copper network which, applied retroactively to 1 January 2013, led to a further loss of revenue of 111 million euros compared to 2012. In addition to this is the introduction of a price cap on roaming traffic introduced at European level in July 2012.

In this context, performance in 2013, in terms of organic change compared to 2012, shows a reduction of 9.4%, with a slightly improving trend in the last quarter of the year  (-7.7% in the fourth quarter, compared to -9.1%  in the third quarter and -10.5% in the first quarter of 2013). Excluding the impacts of, on the one hand, the reduction due to the new mobile termination rates, and, on the other, the change in wholesale prices for access to the copper network, the 2013 performance would be -6.8% compared to 2012, with signs of recover in the last months of the year (-5.7% in the fourth quarter, compared to -7.2%  in the third quarter and -7.3% in the first quarter of 2013).

The reduction dynamics are attributable in particular to the fall in revenues from traditional services (voice, messaging, circuit switched data, which was only marginally offset by the development of innovative services, particularly on Fixed-line Broadband, ICT and Mobile Internet.

Highlights:

  • Core Domestic Revenues
    Core Domestic revenues totalled 15,269 million euros (16,933 million euros in 2012), a fall of 9.8% in both reported and organic terms.

    The performance of the individual market segments as compared with 2012 is as follows:
  • Consumer: Consumer segment revenues totalled 8,024 million euros in 2013, a fall of 811 million euros compared to 2012 (-9.2%), principally attributed to Mobile services revenues (-693 million euros, or -16.2%), particularly traditional Voice services (-660 million euros, -319 million euros of which attributable to the reduction in MTRs), and Messaging (-95 million euros), only partially offset by the constant growth in mobile internet Browsing (+74 million euros, or +12,1% compared to 2012). Fixed service revenues also fell -183 million euros (-4.3%), compared to the 2012 figure, entirely attributable to the contraction in voice revenues (-205 million euros, after the reduction in customers/accesses and the contraction in traffic usage) and only partially offset by higher Broadand revenues (+28 million euros, thanks to the maintenance of our market share and the positive trend in ARPU, supported by the higher proportion of customers with bundle/flat rate offers). However, in the fourth quarter of 2013 the rate of decline slowed down, in comparison with the preceding periods (-8.2% compared to -9.5% in the third quarter and -9.5% in the first half of the year), principally on Mobile revenues. Indeed, the latter, while still presenting a strong contraction in revenues correlated with competitive access dynamics and the consequent pressure on prices and churn rates that characterised the first half of 2013, reported a slowing of performance from the third quarter of the year, due to the effect of the lesser impact of the reduction in MTR revenues, and also, more marginally, to an improvement in commercial performance and stabilisation of our market share;
  • Business: The revenues of the Business segment totalled 5,211 million euros, 668 million euros compared to 2012 (-11.4%). The fall was due entirely to revenues from services (-659 million euros), including -331 million euros on Mobile (-19.6%) and -354 million euros on Fixed-line (-9.0%). In particular, on Mobile services this contraction is attributable to the fall in revenues from traditional voice and messaging services (-319 million euros), after a fall in average revenues per unit (ARPU ) and the aforementioned reduction in mobile termination rates (equal to 110 million euros). On Fixed-line, cooling demand due to the negative economic situation and the fall in the prices of more traditional voice and data services continue to have a dampening effect;
  • National Wholesale: the Wholesale segment reported revenues totalling 1,897 million euros in 2013, down 155 million euros (-7.6%) on the 2012 figure. This is entirely attributable to the aforesaid regulatory changes which have cut the prices for LLU access, Bitstream, Wholesale Line Rental and termination.
  • International Wholesale Revenues

    International Wholesale revenues in 2013 amounted to 1,263 million euros, down by 130 million euros (-9.3%) on the same period of 2012. The contraction was seen particularly in Voice services (-84 million euros, -8.6%) following the annual review of bilateral contracts and the transit component, with a consequent focus on renewing higher margin agreements. Revenues were down for IP/Data services (-26 million euros, -8.9%) in the captive market component in particular. Despite the overall increase in the total bandwidth sold, the market also suffered from the increasingly competitive scenario and the resulting fall in prices. Also down, particularly in the Domestic component, was the multinational companies business segment (-23 million euros equal to -28.4%). Sustained attention paid to profit margins on traffic and major actions to contain costs did, however, result in an EBITDA of 203 million euros, with profitability substantially in line with the previous year.

EBITDA for the Domestic Business Unit amounted to 7,746 million euros in 2013, down 930 million euros on 2012 (-10.7%). EBITDA margin was 47.9%, slightly down on 2012 (-0.6 percentage points).
This result was primarily affected by the decrease in revenues from services (-1,700 million euros on 2012) and the impact of the Antitrust penalty relating to the A428 proceedings (84 million euros), which were only partly offset by the reduction in quotas payable to OLOs (attributable primarily to the reduction in termination rates) and the efficiencies achieved through selective monitoring and containment of operating costs. As already mentioned with reference to the trend in revenues, EBITDA performance also recovered in the last quarter of 2013, with a limited fall of -4.8% compared to the fourth quarter of 2012 (-11.0% in the third quarter and -13.2% in the first quarter).

In organic terms, EBITDA totalled 7,961 million euros (-865 million euros, equal to -9.8% compared to 2012), with an EBITDA margin at 49.1% of revenues, essentially in line with the same period of the previous year (-0.2 percentage points).

EBIT for 2013 was 1,993 million euros, an increase of 915 million euros compared to 2012 (1,078 million euros). This performance reflects the lower impairment loss on goodwill of 2,187 million euros for the Domestic Cash Generating Unit (4,016 million euros in the 2012 financial year) based on the results of the impairment test.

Organic EBIT, calculated excluding, in particular, the aforementioned impairment loss on goodwill, was  4,395 million euros, a fall of 829 million euros (-15,9%) compared to 2012 (5,224 million euros). The EBIT margin fell from the 29.2% of 2012 to 27.1% of 2013.

Headcount at the end of the year stood at 52,695 employees (53,224 as of 31 December 2012).

                                                                ***

BRAZIL

(average real/euro exchange rate 2.86830)

The  2013 revenues of the Tim Brasil Group were 19,921 million reais, 1,157 million reais higher than in 2012 (+6.2%). Revenues from services totalled 16,701 million reais, up by 281 million reais compared to 2012 (+1.7%). Revenues from product sales increased from 2,344 million reais in 2012 to 3,220 million reais in 2013 (+37.4%), thanks to the greater penetration of customer bases with high-end handsets (smartphones/webphones) and tablets, an important lever for developing Data Service revenues.

Mobile ARPU in 2013 was 18.6 reais compared to 19.1 reais in 2012 (-2,6%). ARPU and service revenue performance were affected both by competitive pressures, which led to a fall in business voice unit prices, and by the reduction in the network interconnection rate for other mobile operators.

The total number of lines as of 31 December 2013 was 73.4 million, up by 4.3% compared to 31 December 2012, corresponding to a market share for the lines of 27.1%.

EBITDA for the 2013 financial year was 5,198 million reais, 190 million reais higher than the previous year (+3,8%). The EBITDA increase is sustained by the increase in revenues, partly offset by the higher costs of materials, services and personnel. The EBITDA margin was 26.1%, down 0.6 percentage points on 2012.

In organic terms, the 2013 EBITDA was 137 million reais higher (+2.7%) than in 2012; it should be recalled that in 2012 there were non-organic charges of 53 million reais. The organic EBITDA margin was 26.1%, down 0.9 percentage points on 2012.

EBIT amounted to 2,460 million reais an improvement of 36 million reais on 2012. This is explained by the higher contribution of EBITDA, partially counterbalanced by increased depreciation and amortisation of 155 million reais (2,736 million reais in 2013 compared with 2,581 million reais in 2012).

In organic terms, EBIT was 2,460 million reais in 2013, 17 million reais down on 2012 (-0.7%).

Headcount stood at 12,140 employees (11,622 as of 31 December 2012).

                                                                 ***

OLIVETTI

Revenues for the 2013 financial year totalled 265 million euros, 15 million euros less than in 2012 (280 million euros, -5.4%; the organic change, net of exchange rate effect, was -5.0%).

The fall in revenues is primarily due to the fall of approximately 13 million euros in copying and printing sales on the Italian market, where enterprises and professional customers have been the most exposed to the market crisis, to the fall of approximately 6 million euros in revenues from specialised applications and systems (in the previous year, this segment had benefited from 10 million euros revenues from a commission to supply and install geolocalisation equipment) and fewer sales of inkjet products for some 6 million euros as a result of the winding up process of Olivetti I-Jet Spa. These falls were offset by an increase in revenues for new services and cloud solutions (+7 million euros), especially in the Italian market.

EBITDA was negative for 4 million euros, a 53 million euros improvement compared to the previous year. In particular, in the 2012 financial year EBITDA was affected by the provision made for restructuring charges and other winding up costs totalling 31 million euros, due to the start of the winding up of Olivetti I-Jet S.p.A.. Additionally, the Research & Development business unit of Olivetti I-Jet was sold in November 2013; this involved the release of funds totalling 6 million euros, part of the provision referred to above. Excluding these phenomena, the organic change is positive for 16 million euros (+61.5%).

The 2013 financial year was also characterised by the effects of the fire that on 19 March 2013 completely destroyed the spares warehouse. The total damage to the group after this event was settled with payment of insurance compensation of 19 million euros.

EBIT was a negative 8 million euros, a 57 million euros improvement compared to the 2012 financial year, negative for 65 million euros. This result was influenced by the events described above for the trend in EBITDA; the organic change, calculated excluding the aforementioned effects of the Olivetti I-Jet winding up, was positive for 17 million euros (+54.8%).

The headcount of 682 employees fell by 96 units compared to 31 December 2012.

                                                                 ***

RESULTS OF TELECOM ITALIA S.P.A.

MAIN VARIATIONS TO THE CORPORATE PERIMETER

The following change occurred in 2013:

•  Acquisition of the “Network Operations” business unit from Telecom Italia Sparkle S.p.A.: the effects of the acquisition by Telecom Italia of the Network Operations business unit, partially demerged from Telecom Italia Sparkle S.p.A., were posted to the accounts from 1 September 2013, based on the balance sheet at 31 December 2012.

Revenues totalled 15,304 million euros, a fall of 1,636 million euros (-9,7%) compared to 2012; the organic change in revenues was -9,5%, after excluding the 32 million euros reduction due to the settlements and composition agreements with customers and other operators.

As well as the worsening of the macroeconomic context and the increased competition, particularly on Mobile services, this performance was affected by a number of major regulatory discontinuities, such as the coming into force of new mobile termination rates (MTR), which caused negative economic effects of -364 million euros (-429 million euros on Mobile Revenues alone), as well as AGCom decisions in December 2013 on copper network access prices, which had a further negative impact of 111 million euros compared to the 2012 financial year.

EBITDA was 7.537 million euros, down 896 million euros compared to 2012 (8,433 million euros). The EBITDA margin fell from the 49.8% of 2012 to 49.2% in 2013; the organic change in EBITDA was negative at 9.8% (-845 million euros). At organic level, EBITDA margin was 50.5% (50.7% in 2012).

EBIT was 1,878 million euros, an increase of 934 million euros compared to 2012 (944 million euros). Both the 2013 EBIT and that of 2012 reflect the goodwill impairment of 2,187 million euros and 4,016 million euros respectively. The EBIT margin increased from the 5.6% of 2012 to 12.3% in 2013; the organic change in EBIT was negative at 15.9% (-808 million euros). At organic level, the EBIT margin was 27.9% (30% in 2012).

The net result stands at -1,028 million euros (-1,821 million euros in 2012); excluding losses of a non-recurring nature, including, primarily, the impairment loss on goodwill, the net result for financial year 2013 would have been positive, at 1,255 million euros (1,908 million euros in 2012).

The headcount at 31 December 2013 was 44,386 employees (44,606 employees at the end of 2012).

                                                                ***

EVENTS SUBSEQUENT TO 31 December 2013

Bond Issue
On 23 January 2014 Telecom Italia S.p.A. issued a note for the amount of 1,000 million euros, with annual coupon rate 4.5% and maturity on 25 January 2021. The bond issued at the price of 99.447% recognises a return of 4.594%.


Early repayment of "Hybrid" Bond for 750 million euros

On 29 January 2014 Telecom Italia announced its decision to repay in advance all the subordinated “hybrid” bonds in circulation called €750,000,000 Capital Securities due 2073 (the “Capital Securities”), issued on 13 March 2013 as per the statement released. Telecom Italia has in fact decided to exercise the option of early repayment linked to a change in method by a rating agency which leads to a reduction of the equity content initially assigned to the instrument, pursuant to Condition 6.5 (Early Redemption following a Rating Methodology Event) of the regulations on Capital Securities.

The bonds were repaid on 3 March 2014 (the “Early Repayment Date”) and the relative early repayment price was 101% of the nominal value plus the interest due up until the early repayment date (excluded).

The Autonomous Province of Trento exits the Trentino NGN project

In February 2014 the Autonomous Province of Trento officially announced the exit from the capital of Trentino NGN, the public-private company formed in 2011 to create a fibre optic network in the territory of Trentino, in which Telecom Italia held a shareholding of 41.07%.

The decision was made considering the extended period of waiting and inactivity following the investigation of the European Commission started in July 2012.

The Autonomous Province of Trento's exit from the capital was announced to the European Commission and, therefore, the reasons that determined the start of proceedings no longer exist.

On the basis of the agreements between the parties, on 28 February 2014 Telecom Italia acquired the shareholding held by the Autonomous Province of Trento (52.2%) and a part (4.2%) of the shareholding held by one of the minority shareholders (La Finanziaria Trentina S.p.A.), with a total disbursement of around 17 million euros. Therefore, Telecom Italia now has control of the company.

                                                                  ***

OUTLOOK FOR THE 2014 FINANCIAL YEAR

The telecommunications market continues to be characterised by a fall in traditional services (access and voice) compared to an increase in innovative services (broadband and enabled broadband services); it is expected that the combined effect of these phenomena will determine a further overall fall in the domestic market, in any case more moderate that that seen in 2013, and the growth of the Brazil market.

In this context the Telecom Italia Group – as announced in the 2014-2016 Plan – will continue to defend its market shares, invest in the development of infrastructures, with a heavy increase in innovative investments destined in particular to Ultra Broadband, in order to maintain revenues from traditional services and promote the growth of revenues from innovative services, in compliance with its financial policies. At the same time the Telecom Italia Group will continue the path of transformation and increasing efficiency in industrial processes aiming for a structural reduction of the running costs even through the delayering and simplification of the platforms.

The initial findings of 2014, in line with the three-year Plan, confirm a cooling of the competitive dynamics in the Mobile sector. Nevertheless it should be pointed out that the first months of the year have seen greater dilution of voice ARPU on the domestic market, both Mobile and Fixed, due to a dynamic involving the repositioning of the Customer Base towards bundle offers that will in any case allow – with respect to a short-term reduction in profitability – greater stabilisation of expenditure and churn in the medium to long term. On the Fixed market this dynamic is also dictated by the need to respond, with commercial pricing actions, to competitive pressure which is higher than expected.

Despite greater pressure on the ARPU and the uncertainty regarding the stability of the Revenues, a gradual recovery of the operating performance is expected for the current year in keeping with the dynamics of the 2014-2016 three-year Plan.

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BOND BUY BACK OPERATION FOR 500 MILLION EUROS

Telecom Italia SpA will launch on the market today a buy back offer, for the sum of 500 million euros, for its own bonds in euros at fixed rate, expiring between May 2014 and March 2016.

The operation, in the context of a solid liquidity position, allows the active management of debt maturities and the optimization of the economic terms for the early refinancing of the maturities themselves.

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INCREASE IN SHARE CAPITAL TO SERVICE THE EMPLOYEE SHARE OWNERSHIP PLAN

Exercising the powers granted on 17 April 2013, the Board of Directors resolved to increase the share capital to service a share ownership plan reserved to the personnel of Telecom Italia and its Italian subsidiaries. In line with the decision made by last year's Shareholders' Meeting, the plan provides for 54,000,000 ordinary shares to be offered at a discounted price 10% below the market price,  with assignment of a free share ("bonus share" ) for every three shares subscribed for cash to those employees who retain their shares for one year.

The Board of Directors has conferred a mandate on its legal representatives to implement the plan. The offer is scheduled to take place by the end of June.

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SUPPLEMENT TO THE AGENDA OF THE SHAREHOLDERS' MEETING

As mentioned on 27 February last, the Board of Directors has supplemented the agenda for the work of the Shareholders' Meeting already called to renew the board (Rozzano, viale Toscana 3, 16 April 2014, single call), adding the following topics.

Financial Statements - Dividend

With its approval of the financial statements at 31 December 2013, the Shareholders' Meeting will be asked to resolve on covering the losses on the year, and on the distribution of the privileged dividend of 2.75 eurocents per share to the savings shareholders, by using the reserves. The dividend will be payable starting from 25 April 2014, with a coupon date of 22 April 2014 (record date 24 April 2014).

Report on Remuneration

The shareholders' meeting will be called on to approve, with non-binding vote, the first section of the Report on remuneration, regarding the remuneration policy for 2014.

The document will be made available to the public within the terms of the law, together with the annual financial report and the usual report on corporate governance and share ownership, also approved today by the Board of Directors.

Supplementary remuneration for the Board of Statutory Auditors

The Shareholders' Meeting will be asked to supplement the remuneration for the members of the Board of Statutory Auditors already decided by the Shareholders' meeting on 15 May 2012, attributing an individual attendance fee (the same sum for the Chairman of the Board of Statutory Auditors and for the Standing Auditors) of  500 euros gross for each meeting they attend in addition to the  24 scheduled meetings per year, with effect from 1 January 2014.

Stock options plan

The Shareholders' Meeting will be asked to approve a stock options plan with a three-year duration, for part of the Group management, to be identified by the Board of Directors in due course. The details of the initiative will be stated in the information document which will be published within the terms of the law.

The Plan will involve a maximum of 196,000,000 options, free and non-transferable, which will give the beneficiaries the right to subscribe the same number of Telecom Italia ordinary shares, at a strike price determined at the time of the launch, in line with the market price of the share. The Board of Directors will determine the potential beneficiaries, the number of options attributed to each, the strike price, the metrics for the performance conditions upon achievement of which the options shall become exercisable, wholly or in part, hereby identified in the cumulated free cash flow of the 2014-2016 industrial plan and in the Total Shareholder Return of the share, with respect to a panel of sector operators.

The plan will be serviced by a specific mandate to increase the share capital for payment, for a maximum amount of 196,000,000 newly issued ordinary shares (with a maximum dilution of 1.46% of the total capital and 1.1% of the ordinary shares only, at 31 December 2013).

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CORPORATE GOVERNANCE ISSUES

The requirements for composition of the board are fulfilled by the body as a whole, and Directors Calvosa, Egidi, Fitoussi, Sentinelli and Zingales fulfil the requirements to be considered independent pursuant to the Borsa Italiana Code as ascertained by the Board of Directors.

The issues considered by the Board of Directors will be contained in the report on corporate governance and share ownership.

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The Manager in charge of preparing the corporate accounting documents, Piergiorgio Peluso, hereby declares, pursuant to subsection 2, Art.154-bis of Italy’s Consolidated Finance Law, that the accounting information contained herein corresponds to the company’s documentation, accounting books and records.

The results of the 2013 financial year will be illustrated to the financial community during a conference call scheduled today at 12 pm (Italian time). Journalists may listen to the conference call, without asking questions, by calling: +39 06 33168.

The presentation slides, with an opportunity to follow the event in audio streaming, will be available at www.telecomitalia.com/FY2013/ita. Those unable to connect live may follow the presentation until Friday 14 March 2014 by calling :+39 06 334843  (access code 618375#).

Milan, 7 March 2014