Telecom Italia Group net income 1,775 million euro, up 81.3% compared with the first half of 2004
Telecom Italia S.p.A. net income 1,352 million euro, up 163% compared with the first half of 2004
Increased investment in fixed-line network,
TELECOM ITALIA GROUP
REVENUES 14,692 MILLION EURO (+5.2% COMPARED WITH FIRST HALF 2004) +4.8% ORGANIC GROWTH
EBITDA 6,519 MILLION EURO (+2.6% COMPARED WITH FIRST HALF 2004) +3.2% ORGANIC GROWTH
EBIT 3,989 MILLION EURO (+6.2% COMPARED WITH FIRST HALF 2004) +0.5% ORGANIC GROWTH
CONSOLIDATED NET INCOME 1,775 MILLION EURO, +81.3% COMPARED WITH FIRST HALF 2004
TELECOM ITALIA SPA
REVENUES 9,314 MILLION EURO,
EBITDA 3,999 MILLION EURO,
EBIT 2,405 MILLION EURO,
PRE-TAX PROFIT 2,020 MILLION EURO,
NET INCOME 1,352 MILLION EURO,
The Telecom Italia Board of Directors, chaired by Marco Tronchetti Provera, today examined and approved the company accounts for the first half of 2005.
TELECOM ITALIA GROUP
Revenues amounted to 14,692 million euro, an increase of 5.2% compared with the first half of 2004 (13,968 million euro). Excluding the positive effects of exchange rate variations and the negative effects of changes to the scope of consolidation, organic growth was 4.8% (up 670 million euro). Growth in the first half of 2005 was led by a very strong performance from the Mobile Business Unit (up 478 million euro) – especially its operations in Brazil (up 312 million euro) – and by the good performance of value-added services on the Italian market (up 142 million euro). The Wireline Business Unit also performed well (up 195 million euro), particularly in the broadband market and through innovative service growth.
EBITDA (operating result before depreciation and amortization, capital gains/losses, and revaluations and write-downs of non-current activities) was 6,519 million euro and registered growth of 2.6% compared with the first half of 2004 (up 166 million euro). Ebitda equaled 44.4% of revenues (45.5% in first half 2004).
EBIT (operating result) was 3,989 million euro, an increase of 6.2% compared with the first half of 2004 (up 233 million euro). Ebit equaled 27.2% of revenues, an improvement compared with first half 2004 (26.9%).
The first half of 2005 closed with a consolidated net profit of 1,775 million euro (2,179 million euro before minorities), up over 81% compared with the same period in 2004 (979 million euro). Consolidated net result growth was mainly due to improved operating income during the first six months of the year, in addition to higher net profits from discontinued operations and operations in the process of being discontinued worth 421 million euro (an increase from 397 million euro in first half 2004) mainly due to the capital gain from the disposal of TIM Hellas.
Industrial investment in the first half of 2005 totalled 2,181 million euro, an increase of 289 million euro compared with the year-earlier period, mainly due to greater investment by the Wireline business unit.
Net financial debt on June 30, 2005, stood at 44,111 million euro (32,862 million euro at end 2004). The debt increase was due to the takeover of TIM and other acquisitions of TIM shares (13,832 million euro) and dividend payments (2,318 million euro). Over the first 6 months of 2005, however, debt was reduced by approximately 4.9 billion euro, partly as a result of net cash generation.
Group headcount on 30 June 2005 was 83,221 (82,397 excluding disposed activities and activities in the process of disposal). On 30 June 2004, headcount was 93,183 (82,091 excluding disposed activities and activities in the process of disposal).
Telecom Italia SpA first-half 2005 results
The financial results of the Telecom Italia S.p.A. parent company for the first half of 2005 and the results during the period to which they are compared have been calculated according to Italian accounting standards, since the application of IAS/IFRS accounting standards to Parent company accounts applies only from 2006. Telecom Italia S.p.A.’s income, balance sheet and financial data take into account the operations of the merged TIM solely for January and February 2005. On March 1, 2005, TIM’s Italian operations were transferred to the newly-founded TIM Italia S.p.A., a company 100 percent-owned by Telecom Italia SpA. First-half 2004 data have been recalculated to reflect the incorporation of IT Telecom and EPIClink into Telecom Italia, with effect from January 1, 2004 for accounting and tax purposes.
Revenues amounted to 9,314 million euro, up 16.1% compared with the first half of 2004 (an increase of 1,291 million euro).
EBITDA (operating result before depreciation and amortization, capital gains/losses, and revaluations and write-downs of non-current activities) was 3,999 million euro and registered growth of 15.7% compared with the first half of 2004 (up 542 million euro). EBITDA stood at 42.9% of revenues (43.1% in the first half of 2004).
EBIT (Operating income) rose 14.9% to 2,405 million euro, up 311 million euro compared with the first half of 2004. EBIT corresponded to 25.8% of revenues (26.1% in the first-half 2004 figures). This result was affected by greater amortization and depreciation associated with increased industrial investment in the previous year.
Pre-tax profit was 2,020 million euro, up 92% compared with the first half of 2004 (1,049 million euro).
Telecom Italia S.p.A. posted a net result of 1,352 million euro, up 163% compared with the first half of 2004 (514 million euro). The first-half 2005 result was boosted by share dividends (716 million euro) acquired following the public purchase offer for TIM ordinary and savings shares, and from shares acquired subsequently during the first half of 2005 prior to the distribution of dividends (21 April 2005).
Events occurring after 30 June 2005
Key events that took place after 30 June 2005 are outlined below:
SALE OF TIM PERU
The disposal of equity in TIM Peru is part of the Telecom Italia Group’s strategy of rationalizing its portfolio of international holdings in order to focus on high-growth markets that offer the greatest opportunity to leverage fixed-line and mobile platform integration.
PRIVATIZATION OF TURK TELEKOM
The $6.55 billion acquisition was undertaken by a special purpose vehicle led by Oger Telecom, a newly created joint venture in which the majority shareholder is the Saudi-Lebanese company Saudi Oger Limited, and in which Telecom Italia will make an initial $200 million investment through TIM International. The Telecom Italia/Saudi Oger Limited partnership will focus on the mobile market, while Oger Telecom’s fixed-line operations will continue with BT Telconsult, as previously announced.
Subsequent to the closing of the privatization, Telecom Italia and Oger Telecom will enter into a four-year Technical Assistance Agreement with Turkey’s Avea mobile carrier, currently owned by TIM International (40%), Turk Telekom (40%) and local bank IsBank (20%). Under the terms of the agreement with Saudi Oger Limited, TIM International’s Avea shareholding may be transferred to Turk Telekom, along with a partial reinvestment of the proceeds from the sale of shares in Oger Telecom, or alternatively be sold directly to Oger Telecom.
BUSINESS UNIT RESULTS
Telecom Italia Media’s results for the first half of 2005 were reported in the press release distributed on 6 September 2005, following their approval by the Board. The operations of the IT Group are not separately detailed, having been integrated into the Wireline business unit and Other Activities following the merger of IT Telecom into Telecom Italia at the end of 2004.
Revenues amounted to 8,844 million euro, posting an increase of 2.1% compared with the first half of 2004 (up 186 million euro); organic growth, applying the same scope of consolidation and excluding the effects of exchange rate variations, was 2.3% (up 195 million euro).
The increase was due to the strong development of Value Added Services and innovative terminals - sustaining the core voice-telephony market - and the continued growth of the Italian broadband market and development of the European Broadband project.
The core voice-telephony component saw revenues of 5,169 million euro, down 2.9% compared with the first half of 2004. The portfolio of innovative Tutto 4 Star, Chat SMS and Alice Mia VAS offers in June 2005 reached 2,516,000 units, while the Innovative Terminals portfolio (Aladino, Videotelephone and cordless Wi-Fi) in June 2005 reached 2,810,000 units. VAS and innovative terminals contributed to a strengthening of Wireline’s customer loyalty.
Revenues from the Internet area totalled 593 million euro, growing by 21% compared with the first half of 2004. Wireline’s total broadband portfolio at June 30, 2005, counted 5,568,000 customers, of which 4,615,000 accesses in Italy (+605,000 compared with end 2004) and 953,000 in the rest of Europe (+533,000 compared with end 2004, including Liberty Surf Group customers in France).
Revenues from the Business Data unit were 1,011 million euro, representing total growth of 8.2% compared with the first half of 2004. This was mainly due to strong growth in data VAS.
The European Broadband project (France, Germany, and Holland) saw strong growth with revenue totalling 212 million euro (+84.2% compared with the first half of 2004). Wireline’s total European customer portfolio (broadband plus narrowband) reached 1,417,000 units at June 30, 2005, including Liberty Surf’s customers in France.
Wholesale service revenues amounted to 1,706 million euro after registering 7.8% growth compared with the same period in 2004.
EBITDA (operating result before depreciation and amortization, capital gains/losses and revaluations/writedowns of non-current activities) was 3,965 million euro, an increase of 1.5% compared with the first half of 2004 (up 57 million euro). EBITDA was equal to 44.8% of revenues (45.1% in the first half of 2004). Organic growth was 1.4%.
EBIT (operating result) was 2,528 million euro, an increase of 0.9% compared with the first half of 2004 (up 22 million euro). EBIT amounted to 28.6% of revenues (28.9% in the first half of 2004). Organic growth was 0.7%. This result is impacted by increased amortization and depreciation linked to greater industrial investment carried out the previous year.
Industrial investments totaled 1,428 million euro, an increase of 324 million euro compared with the same period in 2004. This increase was mainly due to investment in innovation, particularly in broadband and new services in Italy and Europe.
EBIT (operating result) amounted to 1,910 million euro, an increase of 3.6% (organic growth 4.7%) compared with the first half of 2004, and equal to 30.6% of revenues, against 32.6% in the first half of 2004. The result was impacted by a structural increase in the depreciation and amortization linked to the development of high-technology investment components (with a relatively short useful life).
Industrial investment in the first half of 2005 amounted to 609 million euro, in line with the first half of 2004.
EBITDA (operating result before depreciation and amortization, capital gains/losses and revaluations/writedowns of non-current activities) was 2,636 million euro, an increase of 3.3% compared with the first half of 2004.
EBIT (operating result) reached 2,025 million euro, an increase of 1.1% compared with the first half of 2004, despite the structural growth in depreciation and amortization associated with actions to develop 3G infrastructure and support platforms for service innovation, and the rollout of new services.
Industrial investment in the first half of 2005 amounted to 337 million euro.
In the first half of 2005, the development of the GSM networks and the drive to grow the customer base proceeded. The TIM Brazil Group, the only operator with coverage across the entire country, maintained its leadership in terms of GSM line numbers, with 12.6 million lines on June 30, 2005 (+155% compared with the first half of 2004 and +43% from December 31, 2004).
The total number of lines supplied on June 30, 2005, was 16.8 million, of which over 75% were GSM (65% on December 31, 2004), an increase of 3.2 million from the beginning of 2005 (+23%) and of 6.3 million compared with the first half of 2004 (+61%).
The TIM Brasil Group confirmed its position as the industry’s number two in terms of number of clients, with a market share of 22.2% and a position of leadership on the incremental market with a share of 31.9%.
The TIM Brasil Group’s consolidated revenues totalled 4,047 million reais, an increase of 39.6% compared with the first half of 2004, due to strong growth in client numbers and the ever-increasing contribution of Value Added Services, which reached 5% in the semester (2.3% in the first half of 2004).
First-half 2005 revenues amounted to 223 million euro, a decline of 75 million euro compared with first half of 2004. Excluding the effects of exchange rate variations and changes to the scope of consolidation (referring, in particular, to the disposal of activities in the USA and Mexico, and the disposal of Innovis SpA and Cell-Tell SpA), organic growth was negative 49 million euro. This figure was impacted by the rationalization of the product portfolio and focus on new ink-jet technology based products.
EBITDA (operating result before depreciation and amortization, capital gains/losses and revaluations/writedowns of non-current activities) was a positive 2 million euro (20 million euro in the first half of 2004) and EBIT was a negative 6 million euro (against +12 million euro in the first half of 2004). The organic variations were a negative 26 million euro for Ebitda and 27 million Euro for Ebit, stemming, in particular, from costs linked to the development of new ink-jet technology based products.
Industrial investments amounted to 8 million euro, in line with the first half of 2004.
BOND ISSUES AND BONDS REACHING MATURITY
Telecom Italia has undertaken two bond issues during the course of 2005, under its Euro Medium Term Note Programme, which allows for bond issues up to a ceiling of 10 billion euro. :
On 17 March 2005, an 850 million euro fixed-rate issue maturing on 17 March 2055;
PLANS FOR THE MERGER THROUGH INCORPORATION OF TELECOM ITALIA DATA CENTER, ISM AND WEBFIN
The Board of Directors also approved plans for the merger through incorporation into Telecom Italia of Telecom Italia Data Center S.r.l, ISM S.r.l. and Finanziaria Web SpA (all 100%-owned subsidiaries).
As called for in their relative bylaws, the merger (which will not require a capital increase by the incorporating entity) will be decided by the administrative bodies of the 4 companies, in accordance with the conditions and terms indicated in article 2505, last paragraph, of the civil code. Completion of the operation is expected by the end of the year.
Milan, September 8, 2005