Board of Directors examines and approves the annual financial report at 31 december 2014

03/19/2015 - 04:15 PM

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Telecom Italia returns to a profit after 3 years

  • Consolidated net profit: 1.350 billion euros (negative for 674 million euros in 2013)
  • Group EBIT:  4.530 billion euros (+67% compared to the 2.718 billion euros of 2013)
  • Proposed distribution of dividend for savings shares of 2.75 euro cents for a total amount of approximately 166 million euros
  • Shareholdings' meeting called for 20 may 2015

Recchi: “during 2014 Telecom Italia successfully launched the process which is leading it to become a public company, oriented towards creating value for all stakeholders and promoting the development and growth of the countries where we operate.  Our ambition is to lead the next generation of progress in our country and the return to profit is a reason for great satisfaction for the new board”.

Patuano: “the 2014 results show that the choice to invest in our future is proving to be a winning one. The positive business trend in the first months of 2015, in line with the goals we had set ourselves, also confirms that Telecom Italia is moving in the right direction and is returning to the role it deserves of operator of primary importance in the telecommunications sector”.


The economic and financial results of the Telecom Italia Group and Telecom Italia S.p.A. for the 2014 financial year as well as 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 2014 financial year, Telecom Italia applied the same accounting principles as used for the previous year, apart from the new Principles/Interpretations adopted from 1 January 2014, which had no impact on the results of the 2014 financial year. 
In addition to the conventional financial performance indicators contemplated under IFRS, the Telecom Italia Group uses certain alternative performance indicators 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. It should be noted that, as of 2014, Telecom Italia has revised the method for determining the Organic Change in Revenues, EBITDA and EBIT, no longer considering non-organic proceeds/expenses, including non-recurrent ones, in this calculation. The organic changes therefore only include the effects of changes - if any - in the consolidation area and foreign exchange rate differences. The previous year's data for comparison has therefore been restated accordingly. The meaning and content of these measures are explained in the attachments.
Note that this release and in particular the information on the "Outlook for the 2015 financial year", contains forward-looking statements about the Group’s intentions, beliefs and current expectations with regard to its financial results and other aspects of 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 2014 has not yet been completed.

The Board of Directors of Telecom Italia met today, chaired by Giuseppe Recchi, to approve the Telecom Italia Group consolidated Financial Statements and the separate draft Financial Statements of Telecom Italia S.p.A. at 31 December 2014.

MAIN VARIATIONS TO THE CONSOLIDATION SCOPE

The following main changes occurred in 2014:

  • Rete A (Business Unit Media): on 30 June 2014 Persidera S.p.A. (former Telecom Italia Media Broadcasting) acquired 100% of the company, and as a consequence, Rete A became part of the consolidation scope of the Group and is fully consolidated from 30 June 2014; on 1 December 2014 the merger by incorporation of Rete A into Persidera was completed;
  • Trentino NGN S.r.l.(Domestic Business Unit): on 28 February 2014, the Telecom Italia Group acquired a controlling stake in the company, that therefore entered the Group's consolidation scope.

The following changes to the consolidation scope occurred during 2013:

  • MTV Group(Media business Unit): 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 scope;
  • La7 S.r.l. (Media Business Unit): on 30 April 2013 Telecom Italia Media completed the sale of La7 S.r.l., consequently the company left the consolidation scope.

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, pursuant to IFRS 5 (Non-current assets held for sale and Discontinued operations).

                                                                      ***

TELECOM ITALIA GROUP RESULTS

Revenues in 2014 amounted to 21,573 million euros, down 7.8% on the 2013 financial year (23,407 million euros). In terms of organic change, calculated by excluding the effect of changes in exchange rates (-565 million euros) and consolidation scope (-39 million euros), consolidated revenues were down 5.4% (-1,230 million euros).

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

(million euros)

2014

2013

Changes

 

 

% of total

 

% of total

absolute

%

% organic

Domestic (*)

15,303

70.9

16,388

70.0

(1,085)

(6.6)

(6.6)

Core Domestic

14,205

65.8

15,269

65.2

(1,064)

(7.0)

(7.0)

International Wholesale

1,244

5.8

1,263

5.4

(19)

(1.5)

(1.5)

Olivetti

227

1.1

265

1.1

(38)

(14.3)

(14.7)

Brazil

6,244

28.9

6,945

29.7

(701)

(10.1)

(2.1)

Media and Other Assets (*)

71

0.3

124

0.5

(53)

 

 

Adjustments and eliminations

(45)

(0.1)

(50)

(0.2)

5

 

 

Consolidated Total

21,573

100.0

23,407

100.0

(1,834)

(7.8)

(5.4)

  (*)   As of 2014, in addition to Core Domestic and International Wholesale, the Domestic Business Unit also includes the Olivetti group; the comparative period has been amended accordingly.

EBITDA was 8,786 million euros, down 754 million euros (-7.9%) from the previous financial year, with an EBITDA margin of 40.7% (40.8% in 2013). In organic terms, the EBITDA is down 643 million euros (-6.8%) compared with the previous financial year and the EBITDA margin is down 0.6 percentage points (40.7% in 2014 compared with 41.3% in 2013).

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

(million euros)

2014

2013

Changes

 

 

% of total

 

% of total

absolute

%

% organic

Domestic (*)

6,998

79.6

7,741

81.1

(743)

(9.6)

(9.6)

% of Revenues

45.7

 

47.2

 

 

(1.5) pp

(1.5) pp

Brazil

1,774

20.2

1,812

19.0

(38)

(2.1)

6.6

% of Revenues

28.4

 

26.1

 

 

2.3 pp

2.3 pp

Media and Other Assets (*)

13

0.2

(17)

(0.1)

30

 

 

Adjustments and eliminations

1

4

(3)

 

 

Consolidated Total

8,786

100.0

9,540

100.0

(754)

(7.9)

(6.8)

% of Revenues

40.7

 

40.8

 

 

(0.1) pp

(0.6) pp

(*)   As of 2014, in addition to Core Domestic and International Wholesale, the Domestic Business Unit also includes the Olivetti group; the comparative period has been amended accordingly.

The EBIT for the 2014 financial year amounted to 4,530 million euros; whereas in 2013 it amounted to 2,718 million euros and reflected the impact of the impairment loss on Goodwill attributed to the Core Domestic CGU for 2,187 million euros.

The organic change in EBIT was positive for 1,843 million euros; also excluding the mentioned impairment loss on Goodwill it would be negative by 344 million euros.

Consolidated net profit amounted to 1,350 million euros, negative for 674 million euros in FY 2013 due to the mentioned impairment loss on Goodwill. Without this impairment loss, profit for FY 2014 would be in line with that of the previous financial year.

Capital expenditure totalled 4,984 million euros in the 2014 financial year, 584 million euros more than in 2013, broken down by operational sector as follows:

(million euros)

2014

2013

Change

 

 

% of total

 

% of total

 

Domestic (*)

2,783

55.8

3,031

68.9

(248)

Brazil

2,195

44.0

1,349

30.7

846

Media and Other Assets (*)

6

0.2

20

0.4

(14)

Adjustments and eliminations

Consolidated Total

4,984

100.0

4,400

100.0

584

% of Revenues

23.1

 

18.8

 

4.3 pp

(*)   As of 2014, in addition to Core Domestic and International Wholesale, the Domestic Business Unit also includes the Olivetti group; the comparative period has been amended accordingly.

Cash flow from operations is positive by 3,174 million euros (positive by 4,803 million euros in the 2013 financial year).

Adjusted net financial debt as of 31 December 2014 was 26,651 million euros, down by 156 million euros compared with 31 December 2013 (26,807 million euros).

In the last quarter of 2014 the adjusted net financial debt increased by 79 million euros compared to 30 September 2014; in particular it should be noted that the positive cash flow from operations was offset not only by the tax disbursements of the last quarter but also by the greater needs, amounting to 0.9 billion euros, deriving from the payments already made for the purchasing of licenses in Brazil and Argentina.

Net financial debt carrying amount as of 31 December 2014 was equal to 28,021 million euros (27,942 million euros as of 31 December 2013).

The liquidity margin as of 31 December 2014 is 13.1 billion euros (13.6 billion euros as of 31 December 2013), net of 0.1 billion euros relating to Discontinued Operations and consists of 6.1 billion euros in cash (7.1 billion euros as of 31 December 2013) and unused committed credit lines totalling 7 billion euros (6.5 billion euros as of  31 December 2013). This margin covers the financial liabilities of the Group falling due over a period exceeding the next 24 months.

Group headcount as of 31 December 2014, excluding the 16,420 units related to Discontinued Operations, was 66,025, including 52,882 in Italy (65,623 as of 31 December 2013, including 53,155 in Italy).

                                                                      ***

BUSINESS UNIT RESULTS

Figures for Telecom Italia Media as of 31 December 2014 can be found in the press release issued on 19 February 2015.

DOMESTIC

As of 2014, in addition to Core Domestic and International Wholesale, the Domestic Business Unit also includes the Olivetti group. This different representation reflects the commercial and business position of the Olivetti group and the process of integrating its products and services with those offered by Telecom Italia in the domestic market. The data relating to the previous year was therefore restated accordingly.

Domestic revenues, totalling 15,303 million euros (16,388 million euros in 2013), fell by 6.6% both in reported and organic terms.

EBITDA for the Domestic Business Unit amounted to 6,998 million euros in 2014, down 743 million euros on 2013 (-9.6%). EBITDA margin was 45.7%, slightly down on 2013 (-1.5 percentage points). 

2014 EBIT was equal to 3,738 million euros (1,985 million euros in 2013); the EBITDA margin amounted to 24.4% (12.1% in 2013). The EBIT performance reflects, in addition to the elimination of the 2,187 million euro impairment loss on goodwill for the Core Domestic Cash Generating Unit posted in 2013, the contraction of EBITDA, partially offset by the reduction of 278 million euros in depreciation and amortisation and by the capital gains, amounting to around 38 million euros, deriving from the sale by Telecom Italia S.p.A. of a property it owned in Milan, for 75 million euros.

Excluding the aforementioned impairment loss on goodwill from the 2013 EBIT, the change would be a reduction of 434 million euros (-10.4%).

The headcount, of 53,076 employees, fell by 301 units compared to 31 December 2013.

                                                                      ***

BRAZIL (average real/euro exchange rate 3.12280)

The 2014 revenues of the TIM Brasil group amounted to 19,498 million reais, recording a fall of 2.1% compared with the 2013 financial year (-423 million reais).

Mobile ARPU in 2014 was 17.7 reais, compared to 18.6 reais in 2013 (-4,8%). The ARPU, like the revenues from services, was affected by a further reduction, starting from February 2014, of the mobile termination rate.

The total number of lines as of 31 December 2014 was 75,721 thousand, up by 3.1% compared to 31 December 2013, corresponding to a market share for the lines of approximately 27%.

EBITDA for the 2014 financial year was 5,541 million reais, 343 million reais higher than 2013 (+6,6%).

EBIT amounted to 2,483 million reais an improvement of 23 million reais on 2013. This is explained by the higher contribution of EBITDA, partially offset by increased depreciation and amortisation of 313 million reais (3,049 million reais in 2014 compared with 2,736 million reais in 2013).

Headcount stood at 12,841 employees (12,140 as of 31 December 2013).

                                                                      ***

RESULTS OF TELECOM ITALIA S.p.A. 

Revenues reached 14,153 million euros, down by 1,151 million euros  (-7.5%) compared to 2013.

EBITDA was 6.739 million euros, down 798 million euros (-10.6%) compared to 2013 (7,537 million euros).

The EBIT margin fell from the 49.2% of 2013 to 47.6% of 2014.

EBIT was 3,580 million euros, an increase of 1,702 million euros compared to the 2013 financial year (1,878 million euros). 2014 EBIT benefited from the positive effect of the reduction of amortisation/depreciation (-280 million euros on 2013) and the capital gain of 38 million euros following the sale of a property owned in Milan. Furthermore, it should be recalled that 2013 EBIT suffered the impairment loss on goodwill in relation to the Core Domestic Cash Generating Unit for 2,187 million euros.

EBITDA margin was 25.3% (12.3% in 2013).

Net profit stood at 636 million euros (loss of 1,028 million euros in 2013). Excluding non-recurring items, 2014 net profit would have been 618 million euros (positive for 1,255 million euros in 2013).

EVENTS SUBSEQUENT TO 31 DECEMBER 2014

Agreement on the transfer of Noverca's 170,000 thousand consumer customers to Tim
See the Press Release on the same subject issued on 9 January 2015

8-year bond issue for 1 billion euros

See the Press Release on the same subject issued on 12 January 2015

Telecom Italia S.p.A. bond buyback offers
See the Press Release on the same subject issued on 21 January 2015

OUTLOOK FOR THE 2015 FINANCIAL YEAR

2015 will see the telecommunications market continue to show a fall in traditional services (access and voice), partly offset by the development of revenues from innovative services due to the increasing demand for connectivity and digital services; it is expected that the combined effect of these phenomena will determine a further overall fall in the domestic market, but considerably less so than that seen in previous years, particularly on Mobile. In Brazil growth is forecast, albeit at lower rates than those recorded in previous years, due to the progressive penetration and saturation of the Mobile market, the migration away from traditional voice-SMS services towards internet services and the impact of the reduction in mobile termination rates (MTR) .

In this context, the Telecom Italia Group – as announced in the 2015-2017 Plan – will continue to defend its market shares, invest in the development of infrastructures, with a heavy increase in innovative investments. More specifically, the five areas of technological development will regard fixed ultrabroadband with optic fibre, mobile ultrabroadband, the development of new data centres to support cloud services, international fibre connections and the transformation of industrial processes aimed at ensuring a structural reduction of the operating costs by simplifying and modernising the infrastructures.

The aim of this acceleration of investments is to create the foundations for stabilisation and recovery of turnover based increasingly on the spread of innovative services with digital content.

Overall investments in the Domestic area in the plan horizon will total more than 10 billion euros, around 5 billion of which solely for innovative developments (NGN, LTE, Cloud Computing , Data Centres, Sparkle and Transformation), which by 2017 will enable 75% of the population to access optic fibre, and over 95% to access 4G. In Brazil the investments over the three year period will total over 14 billion reias (corresponding to over 4 billion euros, at current exchange rate), with the aim to extend 4G coverage to over 15,000 sites, and 3G coverage to over 14,000 sites by 2017.

In this context, for the current year and in line with the trends described in the 2015 - 2017 three-year plan, a progressive improvement is expected in operating performance on both the domestic market (with EBITDA stabilisation target in 2016) and in Brazil.

CALL OF THE SHAREHOLDERS MEETING

The Board of Directors has resolved to call the Shareholders' meeting for 20 May 2015 (single call), at the auditorium in Rozzano (Milan), Viale Toscana n. 3.

Further communications will be issued today.

                                                                      ***

The Manager in charge of preparing the accounting and corporate 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.

Full-Year 2014 Results

Rome, 19 March 2015