Telecom Italia unveiled an updated three-year streategic plan alongside its delayed 2009 financial results. The Italian company also restated its results going back to 2005 following information that emerged from the ongoing investigation at its carrier services unit Sparkle. The investigation alleges that a number of former directors, former employees and current employees of Telecom Italia Sparkle committed crimes of cross-border criminal conspiracy, tax evasion, international money-laundering, reinvestment of proceeds from criminal activities, and registering assets under false names. The offences relate to "Premium” telecommunications services carried over the Sparkle network, conducted with a number of smaller carriers based in the EU. The operator's own internal investigations also unveiled "certain anomalies regarding the actual existence of transactions and traffic, in addition to the progress and routing of traffic itself, to such an extent that the company now believes that these operations were subject to errors". This led to the restatement of results, "without acknowledging any liability whatsoever", the operator said. As a result, revenues for the years 2005-7 were reduced by EUR 1.245 billion and EBITDA was cut by a cumulative EUR 475 million. Net profit for 2005-9 was cut by EUR 507 million for provisions to "address risks and additional charges of a fiscal and legal nature", and the company's shareholders equity was recuded by the same amount.
The final 2009 results show revenues down 6.5 percent to EUR 27.445 billion, while EBITDA edged up to EUR 11.115 billion from EUR 11.090 billion in 2008. Net profit for shareholders dropped to EUR 1.581 billion from EUR 2.177 billion. On an organic basis, excluding forex effects and changes in consolidation, revenues fell 5.6 percent and EBITDA was down 0.5 percent. Telecom Italia said it aims for stable organic EBITDA again in 2010, at around EUR 11.3 billion, while organic revenues will be down around 2-3 percent.
For the period 2010-12, the company will focus on returning to revenue growth in Italy and accelerating growth in Brazil, boosting cash flow and reducing debt. Revenues are expected to average around 1 percent annual growth over the period, down from its previous target for 2 percent in 2009-11. The company raised its target for cash cost reductions to EUR 2.7 billion over the period 2009-2012, from an earlier estimate of EUR 2.0 billion in 2009-2011, of which EUR 900 million was achieved in 2009 and EUR 1.0 billion is targeted for 2010. Operating cash flow over the period 2010-12 is expected to exceed EUR 21 billion and reach 26 percent of revenues by 2012; in 2009 the figure rose by EUR 622 million to EUR 6.928 billion thanks largely to lower capex. Capex is set at EUR 12 billion for the three-year period, including EUR 9 billion for fibre roll-out, improved mobile radio network performance and innovation in Italy. Capital spending in 2009 of EUR 4.54 billion was down by around EUR 500 million from 2008, when the company bought 3G licences in Brazil. Telecom Italia finished 2009 with net debt of EUR 34.75 billion, up by around EUR 700 million from end-2008. The aim is to reduce this to around EUR 32 billion by the end of 2010 and less than EUR 28 billion by the end of 2012.
In its home market, Telecom forecast stable organic revenues over the period 2009-12, while organic EBITDA should grow to EUR 10 billion in 2012. In 2009, domestic revenues fell 6.7 percent to EUR 21.662 billion, and were down 6.8 percent on an organic basis. The company blamed the decline on the loss of over 1 million fixed lines during the year, cuts to mobile temrination rates, lower business spending and the shift in strategy towards high-margin services over mobile handsets. EBITDA was down 0.6 percent to EUR 9.895 billion, and fell 2.1 percent on an organic basis. For 2010, Telecom Italia forecast organic revenues on the Italian market down 4-5 percent and organic EBITDA of EUR 9.8-9.9 billion. Capex is estimated at around EUR 3.1 billion this year, versus EUR 3.5 billion in 2009.
