Telecom Italia hails successful transformation as Q1 sales, earnings rise

Telecom Italia CEO Flavio Cattaneo late on Wednesday hailed his company's turnaround after the company reported strong growth in first quarter sales and earnings.

"We have restored the plus signs to all parameters in both markets," he said in a statement. "The acceleration of the new generation networks in Italy and Brazil enables the transformation of the business."

In Italy, Telecom Italia saw its mobile subscriber base fall 1.4% year-on-year to 29.42 million. However, mobile service revenue increased 2.2% to €1.08 billion, driven by LTE adoption. The company ended March with 8.3 million LTE users, up from 5.0 million a year earlier.

It was a similar story in Brazil, where mobile connections fell to 61.87 million from 67.27 million, but service revenue rose to 3.74 billion reais (€1.08 billion) from BRL3.62 billion.

Meanwhile, the domestic fixed-line business recorded a 3.4% increase in retail broadband connections during the 12 months to 31 March, as the number of subscribers grew to 7.31 million from 7.07 million. However, service revenue fell 2.4% to €2.42 billion, led by the ongoing decline in legacy and wholesale services.

Group revenue for the three months to 31 March surged 8.54% year-on-year to €4.82 billion. Domestic revenue increased to €3.65 billion from €2.55 billion, while revenue in Brazil climbed to €1.18 billion from €897 million.

Group EBITDA jumped to €1.99 billion, up 16.24% on Q1 2016. EBITDA in Italy rose to €1.62 billion from €1.46 billion; Brazil EBITDA increased to €372 million from €258 million.

"With this quarterly report, we end a three-year period of work by the board of directors, during which, we are certain, we started a major transformation of the company, and the results are proving us right," said Telecom Italia chairman Giuseppe Recchi.

Recchi's comment could be interpreted as a farewell speech. Telecom Italia shareholders are due to elect a new board later today and it is expected that major shareholder Vivendi will nominate its own CEO, Arnaud de Puyfontaine, to replace him.

That said, de Puyfontaine's ascension is not guaranteed, given that two influential proxy advisors have recommended that shareholders do not vote for Vivendi's candidates.