Telecom Italia Reports 12 Percent Net Profit Drop

ROME (04/05/2000) - Telecom Italia SpA saw a 12.2 percent fall in its consolidated net profit last year to 3.36 trillion lire (US$1.67 billion), the Italian incumbent telecom operator announced yesterday. Consolidated revenues for 1999 as a whole stood at 52.48 trillion lire, an increase of 8.2 percent on the previous year, the company said.

"The increase in revenues is, in large part, due to the positive performance of mobile telecommunications services, which also benefited from the inclusion of Brazilian companies Tele Celular Sul SA and Tele Nordeste Celular SA into the consolidated figures," Telecom Italia said in a prepared statement. "This was offset by a contraction of turnover registered by fixed telephony and, to a lesser extent, installations and manufacturing activities."

The Telecom Italia board agreed to propose a dividend distribution of 600 lire per ordinary share and 620 lire per savings share to the shareholders' annual general meeting, an increase respectively of 114 percent and 107 percent on the previous year, for a payout of 89.1 percent of the company's 1999 net income, the carrier said.

Group net financial borrowings stood at 15.76 billion lire on Dec. 31, 1999, compared with 15.83 billion lire a year earlier, the company said.

On Monday, the Telecom Italia Group officially submitted its bid for Turkey's fourth and fifth GSM (global system for mobile communications) cell phone licenses, in partnership with Is Bank, Turkey's largest banking group, the Italian carrier said. The Turkish market is expanding rapidly, and at the end of 1999, cell phone penetration stood at 11 percent of a population of 65 million people.

Telecom Italia has decided to scrap its "Fido" city cordless service from June 30, 2001, and is offering incentives to customers who agree to withdraw from the service before the end of next May, a Telecom Italia spokesman confirmed today. The DECT (digital enhanced cordless telephony) service, which provides mobile telephony within a limited geographic location, was launched early in 1998 but has been overtaken by advances in cellular telephony.

Telecom Italia has been disappointed by the take-up of the service, with only 142,000 customers in two years -- compared to Italy's 33 million cell phone subscribers -- and the limited traffic it has generated -- an average of six calls per month per client, published reports said. Telecom Italia has invested some 1 trillion lire in the failed venture but the investment will not be entirely wasted, since the service's repeater stations will be used to provide alternative means of access to the telephone network, the reports said.

"The repeater stations could be used by Telecom Italia Mobile (TIM) SpA (the group's mobile phone subsidiary), but a final decision has not yet been taken," the Telecom Italia spokesman said.

Among the inducements being offered to clients who drop the service by the end of May are a free ISDN line for one year, a free answerphone service for three years or a voucher for 100,000 lire worth of Telecom Italia products, according to a letter sent to customers last month.

Consumer groups were unimpressed by these "consolation prizes." The DECT handsets, which cost around 800,000 lire, will soon become the equivalent of a normal cordless phone with a value of not more than 200,000 lire, according to Elio Lannutti, chairman of the Adusbef consumers' association. The handsets were already "almost unusable, given their technical characteristics and the absence of an effective network of repeaters in the metropolitan areas," Lannutti said in a prepared statement.

"We don't have a reply to these criticisms for the moment," the Telecom Italia spokesman said. "I'm sure there will be one soon."

Telecom Italia can be contacted in Rome at +3906-3688-2806 or on the World Wide Web at http://www.telecomitalia.it/.

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