Telecom Italia S.p.A. (ADR) (NYSE:TI) Reports Mixed 4Q Results with Dividends Increase and Weak Domestic Trends

Telecom Italia S.p.A. (ADR) (NYSE:TI) reported better than expected headline fourth quarter results, with revenues and EBITDA  ahead of Bloomberg consensus estimates driven by exceptional results at TIM Brazil (which already reported), and stronger than expected results from Teo in Argentina.

On Feb 24, Management announced a dividend increase to EUR 0.058 for the ordinary shares and EUR 0.069 for the savings shares. On Feb 25, the company gave the outline of its 2011-13 strategic plans and said that it expects dividend growth of 15% yearly to boost liquidity and slash debt over the next three years.

The Company reported fourth fiscal quarter net earnings of EUR 3.12 billion, up 97.4% or EUR 1.54 billion from EUR 1.58 billion in the same quarter last year.

Excluding nonrecurring items, the company earned EUR 31.47 billion, down EUR 2.48 billion from EUR 33.95 billion in the same quarter last year.

Revenue during the quarter rose 2.5% year over year to EUR 27.57 billion. Group revenues of EUR 7672 million grew 11% boosted by Argentina consolidation and group EBITDA of EUR 2937 million grew by 13%. Domestic revenues declined by 7.2% compared to decline of 7.5% in the third quarter driven by a wireline decline of 4.6% compared to decline of 2.9% in the third quarter and a wireless decline of 11% driven by a service revenue decline of 8.9% compared to third quarter decline of 9.9% and 12.9% decline one year ago. The accelerated revenue decline is driven by a decline in broadband revenues of 2.3% after 2.4% growth in the third quarter and a decline of wholesale revenues of 2.4% after 3.2% growth in the third quarter

Value Added service decline by 3% driven by a 3% decline in messaging and a 3.1% decline in interactive services. On the positive side, TIM added 386k subscribers during the quarter, a 0.5% increase year on year, and outgoing traffic volume increased by 20% compared to a 13% increase in the third quarter. Net debt at the end of the year was EUR 31.5 billion.

For the fourth fiscal quarter, TIM Brazil increased revenues by 9.9% in local currency and generated an EBITDA margin of 30.6%, better than during the fourth quarter of 2009. Argentina generated revenues of EUR 798 million, while reported EBITDA was EUR 245 million.

Shares of an Italy-based company, which offers infrastructures and technological platforms, on which voice and data become advanced telecommunications services went up by 70 cents or 4.87% to $15.07 after opening at $14.96. The stock has a 52-week range of $10.46-$15.66. The volume of 445,954 shares has been traded. The market capitalization of the stock stands at $29.04 billion with P/E of 9.13.

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