Milan:
Telecom Italia SpA almost tripled its target for reducing expenses to 1.6 billion euros ($1.8 billion, Dh6.6 billion) by 2018 in a move pushed by new Chief Executive Officer Flavio Cattaneo, who aims to improve profitability at the former state-owned phone carrier. The shares rose the most in more than two weeks.
The cuts will include 800 million euros in operating costs and 800 million euros in capital spending, the company said. The carrier’s previous cost-cut target was 600 million euros.
“Our goal is combining acceleration in developing ultra-broadband networks — keeping coverage and quality level of services — with a careful cost-control,” Cattaneo said in the company’s first-quarter earnings statement late Friday.
Earnings before interest, taxes, depreciation and amortization fell 16 per cent to 1.71 billion euros, Italy’s largest phone company said. Analysts had predicted 1.83 billion euros, the average of estimates compiled by Bloomberg. Sales declined 12 per cent to 4.4 billion euros, compared with projections for 4.53 billion euros.
While the company is grappling with shrinking phone bills in a home market dogged by competition, Telecom Italia is facing its toughest battle in Brazil. Its unit there, Tim Participacoes SA, competes with Telefonica SA’s Vivo, the country’s biggest mobile carrier, amid Brazil’s deepest recession in at least a century. This week, Tim named Stefano De Angelis its new CEO replacing Rodrigo Abreu.
The stock rose as much as 4 per cent in Milan on Monday, the steepest intraday advance since April 28, and climbed 2.8 per cent to 87 euro cents at 9:06 am. The shares have lost 26 per cent this year, giving the company a market value of 16 billion euros.
Telecom Italia appointed Cattaneo in March, turning to a media industry veteran to implement a turnaround. His predecessor, Marco Patuano, was ousted after clashing with the company’s largest shareholder, Vivendi SA, the French company controlled by billionaire Chairman Vincent Bollore.
In Italy, where the company generates about 70 per cent of sales, Telecom Italia has submitted a bid to buy control of fiber-carrier Metroweb SpA, rivalling an offer by Enel SpA, Italy’s biggest utility. Control of Metroweb would give either Enel or Telecom Italia a leg up in the race to build faster networks.
Domestic consumer revenue rose 2 per cent to 1.76 billion euros in the quarter. Net debt fell to 27.1 billion euros, 139 million euros less than at the end of 2015.
