Telecom Italia (Rome, Italy), the country’s largest telecom operator, kept its forecasts intact in the face of a rapidly-deteriorating economic climate at home, which took the sting out of a $2.8 billion first-half loss due to a goodwill writedown.
The company blamed deteriorating markets and interest rate trends for its $4.5 billion goodwill writedown on its domestic operations. Still, the company said the writedown would have no impact on its dividend or plans to cut debt and stuck to its forecasts for the year, promising trends at home were improving.
Shares of Telecom Italia rose 1.9% Friday morning, while Milan's blue-chip index fell 1.6% as yields on Italian government bonds rose to new record highs.
Excluding the writedown, the company reported first-half profit of $1.65 billion, above the Thomson Reuters I/B/E/S average forecast of $1.58 billion. The group's net loss stood at $2.84 billion after the writedown. Analysts had earlier speculated that a writedown on goodwill stemming from previous mergers and acquisitions was possible; given market turmoil was prompting companies to be cautious in valuations.
Revenues rose 10% to $20.59 billion, above the average forecast of $20.49 billion, boosted by the company's fast-growing operations in Latin America.
Telecom Italia, which is controlled by a group of Italian investors and Spanish rival Telefonica, has in recent years relied on its Brazilian operations to drive growth and offset declines at home. Revenues at its closely-watched Italian mobile unit fell 10.5%, but the company said revenue was shrinking at a slower pace and that there were prospects for further improvement in the second half of the year.
Locked in a fierce price war with rivals Vodafone and Wind, the telecom company has struggled since adopting a strategy targeting higher-value customers last year and investors have been seeking signs of a turnaround.
Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 4% to $8.45 billion, broadly in line with forecasts. The company confirmed that revenues and EBITA would be largely stable this year.
(Editing by Jane Merriman)