Maybe we are. After years of waiting, disputes and hard work, the first positive signs are arriving on the domestic business front of Telecom Italia. Which, accompanied by a more than expected drop in debt and the confirmation of the dividend policy, give wings to the stock on the Stock Exchange, the third best stock on the Ftse Mib, which rises by 6,03% to 0,897 euros per share compared to a of the main index by 3,32%.
The group's numbers have in fact beaten the expectations of analysts on several fronts. Third-quarter profit amounted to 807 million euros (+32,7% on the same period of 2010) against the 708,5 million consensus of analysts. Revenues are also better than forecasts, rising by 12,6% to 7,516 billion compared to a consensus of 7,46 billion. And, the experts point out, overall margins hold, with the domestic EBITDA improving. Thanks to constant attention to processes and costs. On this front, the group, unlike some of its competitors, does not currently have plans to cut labor costs until next year when the agreement with the unions expires. As far as divestments are concerned, there are now small but still useful opportunities to raise cash. Under the lens of the market is Olivetti on which, however, the executive chairman of Telecom Franco Bernabé holds back: "Olivetti has some assets that can be sold but other parts are part of Telecom's core business".
If Brazil and Argentina are only confirmations, the first signs of recovery that the market has been waiting for for years are coming from the domestic front. And that few expected, especially in an economic context like the current one. With the brand recovering strength especially in the youth market. In analyzing the results of the Italian market, it is also necessary to take into consideration the regulatory effect on mobile termination rates which have been reduced by 20%. With constant regulatory elements, the top management points out, signs of an improvement in revenues are emerging.
Of course, the budget for the nine months remains in the red with a loss of 1,206 billion. A result which, however, mainly depends on the write-down already recorded in June of the goodwill of the domestic activities: "excluding the write-down - reads the note - the net result for the period would amount to 2 billion euros (+8,6% compared to the year previous)".
But what catches the eye most is the drop in debt below the psychological threshold of 30 billion for the first time in many years thanks to a sharper drop than analysts expected. Overall debt was reduced to 29,9 billion from 31,46 billion as at 31 December 2010, beating the forecasts of the group's top management who therefore confirm the year-end targets. "We will have to face the payment of frequencies - said the financial director Andrea Mangoni - which will bring us back above the threshold of 30 billion but not significantly, because the good cash flow performance will also affect the last part of the year". In terms of debt structure, maturities are long-term and the group has the liquidity to cover them (5 billion liquidity). In particular, in 2012 Telecom has 4-4,5 billion euros falling due. “This year – explains Mangoni – we refinanced half with specific issues, the rest we preferred to reduce using the liquidity we have in our balance sheet. For next year we intend to follow the same line. We don't need to set deadlines but we will return to the markets when there is an opportunity to do so efficiently”. And an issue in dollars is not ruled out which, says Mangoni, "could be one of the hypotheses next year". The average cost of debt is expected to be stable, despite the difficult market situation which meant recognizing yields of almost 7% on the latest issue compared to the average cost of 5,4%.
The targets envisaged in the business plan are thus confirmed. In detail, expectations for the end of the year are for debt of 30,7 billion and organic revenues and ebitda substantially stable compared to 2010. Here, and the market did not expect it, the group has reiterated its dividend policy, confirming growth of 15% per year of the pay out.
With these results, Telecom Italia seems to have the numbers and the conditions to be able to get back into the game with full rights in the global competitive scenario. “I believe that the telephony market needs to be rationalised: there will be consolidation. Our position is better than in the past and we can be the winners,” Bernabé said. At the moment, however, the group, which has just launched a partnership with F2i for the cabling of Milan, has no acquisitions in sight (We have established that when there are further opportunities in line with our strategy and coherent with the objective of reducing borrowing we will act, Bernabé said): now it is necessary to focus on freshly made investments such as those in Brazil. No need to look for other markets.
