March 10, 2020 / 8:59 PM / 18 days ago

Telecom Italia pushes back core profit target, says virus impact hard to gauge

MILAN (Reuters) - Italy’s biggest phone group, Telecom Italia (TIM) (TLIT.MI), said on Tuesday it was postponing its target to return to core profit growth this year after anticipating lower service revenue dogged by underperforming domestic business.

FILE PHOTO: Telecom Italia logo is seen at the headquarter in Rozzano neighbourhood of Milan, Italy, May 25, 2016. REUTERS/Stefano Rellandini/File Photo/File Photo

But it cautioned the impact of the coronavirus outbreak on Italian and global growth and the possible knock-on effect on its own plan was hard to assess.

“(It) is difficult to quantify at the moment and will be a function of the duration, intensity and effectiveness of containment action,” it said.

Setting out its plan for 2020-2022, the group said it would press ahead with a strategy aimed at cutting its cost base while upgrading its fixed and mobile network.

The group, which has not paid a dividend on its ordinary shares since 2013 - on 2012 results - said it would pay a dividend of 0.01 euro per share on 2019 results.

In a statement Telecom Italia said total revenue last year fell 2.6% to 18 billion euros, in line with a company-provided consensus of 17.998 billion euros. It said domestic sales fell 6.3% to 14.081 billion euros.

TIM, whose investors include French media company Vivendi (VIV.PA) and investment firm Elliott, said organic earnings before interest, tax, depreciation and amortisation (EBITDA) after leases fell 2.2% to 7.2 billion euros in the 12 months ending December.

That was in line with an analyst consensus provided by the company.

The former phone monopoly carrier, which had previously aimed for a return to low single-digit growth in core profit excluding leases starting this year, now sees core profit after leases falling by “low single digit in 2020” before going back to growth next year.

It also set a more ambitious target for reducing its addressable cost base by 10% compared with a 8% decrease included in its previous plan.

The group, which sees significant growth in cash generation over the three-year plan, said it saw net debt after lease falling to below 20 billion euros in 2021 compared with a previous target of 20.5 billion euros.

The debt target does not include proceeds from a planned sale of 12.4% of tower group INWIT (INWT.MI), which is worth around 1 billion euros.

TIM also said it has granted KKR Infrastructure a period of exclusivity as financial partner to develop its fiber business in Italy.

The U.S. infrastructure fund has presented a nonbinding offer to take 40% of the group’s last mile network ahead of a possible tie-up with the all-fiber network of smaller rival Open Fiber, TIM said.

Reporting by Elvira Pollina in Milan; Editing by Stephen Jewkes and Matthew Lewis

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