MILAN (Reuters) - Telecom Italia’s (TIM) (TLIT.MI) quarterly results fell short of forecasts, dragged lower by litigation costs and severance payments in a tumultuous year for the former state monopoly.
TIM lost its chief executive in July as top shareholder Vivendi (VIV.PA) tightened its grip on the company. Then last month Italy’s government, alarmed at the French company’s growing influence, activated a “golden power” to have a say in TIM’s strategic decisions.
TIM’s fixed-line business is losing value, new competitors are appearing in both broadband and mobile and its only foreign business, Brazil, is still in recovery mode.
Ousted CEO Cattaneo had made it a priority to revive growth in Italy, but on Friday the company said Italian sales growth slowed to less than 1 percent in the third quarter from 4 percent in the second. Profits in Italy fell 6 percent.
In the first set of results released under Cattaneo’s replacement, Vivendi protege Amos Genish, TIM said its earnings before interest, tax, depreciation and amortisation (EBITDA) fell 2.5 percent to 2.1 billion euros (1.82 billion pounds), below a consensus analyst forecast provided by the company of 2.2 billion euros.
The shares were up 1.3 percent by 1223 GMT after a sharp early sell-off that traders blamed on human error.
“Domestic indicators have softened a bit, but Brazil is doing well and guidance was confirmed, so positive overall,” a Milan-based trader said.
Earlier this week, TIM’s Brazilian unit, TIM Participações (TIMP3.SA), beat estimates with its quarterly earnings as customers continued to shift away from pre-paid plans in the strengthening economy.
Genish inherits a company saddled with 26 billion euros of debt. The imminent arrival of low-cost French mobile challenger Iliad (ILD.PA) is likely to squeeze profits further. Rival investments in broadband infrastructure by power firm Enel (ENEI.MI) are also undermining TIM’s broadband drive.
Non-recurring charges of 127 million euros for litigation, regulatory and severance items were bigger than expected. TIM did not say exactly what they related to.
However, the company gave a 25 million euro severance package to Cattaneo, who left after just 16 months in the job following clashes with Vivendi.
The company has been fighting a number of regulatory battles. Earlier this year Italy’s antitrust authority launched an inquiry into TIM’s roll-out of ultrafast broadband in rural and sparsely populated areas.
A conference call with Genish later on Friday could offer clues on the strategy that the former Israeli army captain and favourite of Vivendi chairman Vincent Bollore might pursue.
Additional reporting by Stephen Jewkes and Danilo Masoni; editing by Tom Pfeiffer and Elaine Hardcastle