Telecom Italia will spend €14.5 billio n on fixed and mobile infrastructure in Italy and Brazil over the next three years.
The Italian incumbent made the announcement on Friday as it shared the details of its 2015-2017 strategic plan. At the same time the telco posted declines in sales and income for the most recent financial year, but insisted it is moving in the right direction.
The keyword for the latest three-year plan is "accelerating", and "the first part of this plan is more capex," said Telecom Italia CEO Marco Patuano.
The operator will spend €10 billion in Italy during the period, half of which will be channelled into what it terms "innovative developments", such as next-generation fixed networks, LTE, data centres and cloud infrastructure.
It has earmarked €3 billion of that sum – €1.1 billion more than it previously planned to spend – for the development of its fibre network, including €500 million for fibre-to-the-home (FTTH) and the remainder for fibre-to-the-cabinet (FTTC). It aims to reach 75% of the country’s population with fibre by the end of 2017.
By the same date it aims to have covered 95% of the population with LTE. Spending on 4G mobile will be €0.9 billion, which is no acceleration in financial terms, but the number of sites will increase. "Our engineers have been more efficient than expected," Patuano said.
LatAm plan
Telecom Italia plans to spend more than 14 billion reais (€4 billion) in Brazil, BRL2 billion more than an earlier target, primarily on expanding 3G and 4G mobile.
The telco’s TIM Brasil unit has been at the centre of M&A speculation over the past year or so, but Patuano refused to be drawn into a discussion about the unit’s future there.
"My desk is quite full right now with all the stuff we have to put in place," he said, in response to a question about the company’s relations hip with Oi, the local telco that is reportedly planning to table a takeover bid for TIM Brasil. "[There is] no extra place," for Oi, he said.
While TIM Brasil is primarily a mobile business, something that puts it at a disadvantage compared with its domestic rivals, it is looking at the fixed-line space too.
"We have strategic options in the fixed business," TIM Brasil CEO Rodrigo Abreu said.
Corporate solutions "will be an important contributor to growth and EBITDA," he said. In addition, the telco aims to increase its residential fixed connections to more than 500,000 by the end of 2017, up from 130,000 at the end of last year.
"We are ramping up a little bit the investments to make that happen," Abreu said.
Numbers game
Telecom Italia presented its 2015-2017 plan alongside its 2014 results announcement.
The operator posted group revenues of €21.57 billion last year, down by 7.8% on 2013, while EBITDA fell by 7.9% to €8.79 billion. Its EBITDA margin was virtually flat at 40.7%.
The company highlighted a positive performance from its domestic business, where revenue declines in Q4 were slower than in the previous three quarters of the year and the year-ago quarter.
The 2014 performance was "a very encouraging signal in the direction we want to go," Patuano said. He expects domestic EBITDA to stabilise in 2016 and return to growth in 2017.
Net debt fell slightly to €26.65 billion at the end of 2014 from €26.8 billion a year earlier. Excluding investments in spectrum in Brazil and Argentina, debt would have been €25.8 billion.
Telecom Italia aims to reduce debt to 2.5 times EBITDA by the end of the three-year plan.
