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Italian incumbent aims to record 1.6 billion in capex, opex savings by end-2018; names new TIM Brasil CEO.
Telecom Italia has more than doubled its cost-saving target for the next couple of years, it revealed late last week alongside the publication of its first quarter financials.
The Italian incumbent aims to make €1.6 billion worth of cost savings by the end of 2018, up from a previous target of €600 million, it announced in its Q1 report.
That report showed that revenues and earnings fell in the first three months of this year, both at home and – more steeply – at its Brazilian business, the subject of ongoing M&A speculation for the past few years.
Group revenues fell by 12.1% on the year-ago quarter – or 5.6% on an organic basis – to €4.44 billion, with only the telco’s international wholesale operations showing any uplift. Domestic revenues were down by 2.3% to €3.55 billion, as the slight 0.3% growth at Telecom Italia Sparkle failed to offset a 2.6% decline in core domestic sales, but the Brazilian business had the biggest impact on Telecom Italia’s top line.
TIM Brasil contributed just over 20% of group revenues, down from close to 28% a year earlier. Turnover fell by 36.5% to €897 million – in local currency terms the decline was 15.3% to 3.85 billion reais – while EBITDA dropped by 38% (17.4% organically) to €258 million.
At group level, EBITDA slid by 15.8% to €1.71 billion. The domestic business saw earnings fall by 9.3% to €1.46 billion.
"Efficiency and focus on ever more challenging goals, as long advocated by the board of directors, distinguish the new phase for Telecom Italia, starting today," said executive chairman Giuseppe Recchi, in a statement.
He explained that Telecom Italia aims to cover 84% of the Italian population with fibre by 2018, up from 45% at present, and reach 98% 4G coverage.
But these network investments will be backed by "careful cost control," added Telecom Italia’s recently-appointed CEO Flavio Cattaneo.
The telco’s new €1.6 billion cost savings target "will involve targeted actions amounting to around €800 million on opex and around €800 million on capex," Cattaneo said.
He added that in Brazil, Telecom Italia will undertake "a strengthening of the efficiency plans envisaged thus far while maintaining strong development in both 3G and 4G."
"We must take into account the major changes to the macroeconomic, political and market context seen in the country in recent months," Cattaneo said. "A strong sign of change is necessary, which started with the appointment of the new chief executive officer."
Telecom Italia revealed earlier this month that it was carrying out a review of its senior management in Brazil. As predicted, last week it named consumer and SME business head Stefano De Angelis as CEO of TIM Brasil, replacing Rodrigo Abreu, who leaves the company. De Angelis’ previous duties have been assigned to Cattaneo on a temporary basis.
