EBIT came to €1,926 million (-€680 million in FY 2011), impacted in particular by goodwill write-downs resulting from the impairment test totalling €4.4 billion (€7.4 billion in 2011).
Organic EBITDA came to €6,504 million, down €157 million compared with 2011 (-2.4%), with EBITDA margin of 22.0% of revenues (22.7% in FY 2011).
The consolidated net result came to -€1,627 million, mainly due to the goodwill write-down. Excluding the impact of the write-down. Excluding the impact from the write-down, other non-recurring items and the tax refund of €319 million in IRES for recognition of the deductibility of IRAP on labour costs, the result comes to €2,394 million, slightly lower than the normalized result for FY 2011 (€2,518 million).
Capex came to €5,196 million in FY 2012, of which €3,072 million relating to the Domestic Business Unit, a decrease of €899 million compared with 2011.
• the Domestic Business Unit reported a fall of €1,113 million. Excluding FY 2011 investments in purchasing the rights to use LTE mobile telephony frequency bands (€1,223 million) there is a €110 million increase attributable in particular to the development of next generation networks (LTE and fibre) in part offset by the lower requirement in relation to delivery of new systems owing to the slowdown of fixed-line business;
• the Brazil Business Unit reported an increase of €210 million (including a negative forex effect of €94 million), for the purchase of rights to use fourth generation (4G) mobile telephony frequency bands (€145 million) as well as investments to improve the quality of the network infrastructure;
• the Argentina Business Unit reported capex in line with the previous year (+ €1 million already including a negative forex effect of €9 million). Besides the costs of client acquisition, expenditure was aimed at enlarging and upgrading broadband services to improve transmission capacity and increase access speed, traditional fixed-line access to meet demand and backhauling to support mobile access growth. Telecom Personal also invested primarily in increased capacity and enlargement of the 3G network to support Mobile Internet growth.
Operating free cash flow came to €6,470 million, up €703 million compared with 2011 (€5,767 million), making a positive contribution to the reduction in net indebtedness.
In particular adjusted net financial debt at 31 December 2012 amounts to €28,274 million, down €2,140 million compared with 31 December 2011 (€30,414 million).
In Q4 2012 adjusted net financial debt fell by €1,211 million from the end of September 2012; in particular, operating free cash flow amply covered the income tax requirements of around €700 million.
Accounting net financial debt at 31 December 2012 amounts to €29,053 million, down €1,766 million compared with 31 December 2011 (€30,819 million).
The liquidity margin at 31 December 2012 stood at €16.14 billion (€14.7 billion at end of 2011) and consists of €8.19 billion in cash (€7.72 billion at 31 December 2011) and unused committed credit lines for a total €7.95 billion (€7 billion at end of 2011). This will cover the Group’s liabilities beyond the next 24 months.
At 31 December 2012 Group headcount stood at 83,184 employees, of whom 54,419 in Italy (84,154 at the end of 2011, of which 56,878 in Italy).
The 2012 figures for Telecom Italia Media can be found in the press release issued on 4 March 2013, following the Board Meeting's approval.
Matrix, sold on 31 October 2012, was classified among Other Operations in 2012, and thus excluded from the Domestic–Core Domestic BU. The comparable periods were reclassified accordingly.
Domestic revenues came to €17,884 million, falling equally by 5.8% in reported and in organic terms (€18,991 million in 2011).
EBITDA for the Domestic Business Unit amounted to €8,676 million, down €497 million from 2011 (-5.4%). EBITDA margin was 48.5%, up 0.2 percentage points from 2011.
Organic EBITDA came to €8,829 million (-€458 million, -4.9% compared with 2011) with EBITDA margin at 49.3% of revenues, higher than the previous year (+0.4 percentage points).
EBIT rose by €3,074 million to reach a positive €1,078 million, compared with a negative €1,996 million in 2011. The result is affected in particular to the goodwill write-down of the Core Domestic cash generating unit of €4,016 million, (€7,307 million in FY 2011), based on the outcome of the impairment test.
Organic EBIT, calculated excluding in particular the goodwill write-downs referred to above, slipped €139 million compared with 2011 to €5,226 million (-2.6%), while EBIT margin rose from 28.2% in FY 2011 to 29.2% in FY 2012.
Headcount at the end of the year stood at 53,224 employees, down 1,823 compared with 31 December 2011 (the variation includes the effects of the acquisition, with effect from 1 January 2012, of the Contact Center and its 249 resources from the company Advalso belonging to the Olivetti Business Unit).
Brazil (average real/euro exchange rate 2.50953)
Revenues of Tim Brasil Group in FY 2012 came to 18,764 million reais, 1,678 million reais higher (+9.8%) than in 2011. Revenues from services grew to reach 16,420 million reais, up from 15,353 million reais in 2011 (+6.9%). Revenues from product sales rose from 1,733 million reais in 2011 to 2,344 million reais in 2012 (+35.3%), reflecting the company's strategy of market penetration with high-end handsets (smartphones/webphones and tablets) as a lever to grow mobile data services.
Mobile ARPU (Average Revenue Per User) stood at 19.1 reais in FY 2012 compared with 21.4 reais in FY 2011 (-10.7%). The total number of lines at 31 December 2012 was 70.4 million, 9.8% higher than on 31 December 2011, representing a 26.9% market share.
EBITDA amounted to 5,008 million reais, up 377 million reais from FY 2011 (+8.1%); operating margin growth was sustained by the increase in revenues, mainly VAS, essentially counterbalanced by the higher termination rates due to increased traffic volumes and costs strictly linked to changes in the customer base.
EBITDA margin was 26.7%, 0.4 percentage points lower than 2011.
Organic EBITDA in 2012 amounted to 5,061 million reais, an improvement of 412 million reais on 2011 (+8.9%). Organic EBITDA margin was 27.0%, 0.2 percentage points lower than the previous year. The increased margin in revenues from services was countered by the greater share of turnover from sales of smartphones/webphones.
EBIT amounted to 2,424 million reais, an improvement of 135 million on FY 2011. This is explained by the higher contribution of EBITDA, partially offset by increased amortisations of 241 million reais.
Compared to the same period of 2011, the organic change in EBIT was positive by 170 million reais, with EBIT margin standing at 13.2% (13.5% in FY 2011).
The headcount at 31 December 2012 stood at 11,622 employees (10,539 at 31 December 2011).
Argentina (average peso/euro exchange rate 5.84408)
2012 revenues came to 22,116 million pesos, an increase of 3,620 million pesos (+19.6%) compared with 2011 (18,496 million pesos) thanks to growth of the Broadband and Mobile client bases, as well as ARPU.
The main revenue source for the Argentina Business Unit is mobile telephony which grew by more than 22% on the previous year and delivers 73% of the BU's consolidated revenues.
EBITDA rose by 606 million pesos to reach 6,553 million pesos, +10.2% compared with 2011. The EBITDA margin was 29.6%, 2.6 percentage points less than in FY 2011, mainly due to the higher incidence of purchases of materials and services and labour costs.
Organic EBITDA - calculated excluding the 90 million pesos in restructuring costs involving employees of certain specific segments - grew by 11.7% compared with FY 2011 with an EBITDA margin of 30%.
FY 2012 EBIT came to 1,253 million pesos compared with 2,925 million pesos in the previous year.
The fall (1,672 million pesos) is largely due, besides the restructuring charges described above, to the complete write-off of goodwill with the acquisition of control by Telecom Italia Group (979 million pesos), the partial write-down of the customer relationships (501 million pesos) and the higher amortisations of these assets following review of their useful lives (383 million pesos).
Without the above write-downs and restructuring charges, FY 2012 EBIT amounted to 2,823 million pesos, a fall of 102 million pesos compared with FY 2011, with EBITDA margin of 12.7% (3.1 percentage points lower than the previous year).
The headcount at 31 December 2012 stood at 16,803 employees (16,350 at 31 December 2011).
On 1 January 2012, the activities and resources of the Advalso S.p.A. contact center were sold to Telecontact Center S.p.A. (subsidiary of Telecom Italia – Domestic Business Unit), as part of a project to bring all Telecom Italia Group call center operations under centralised management.
In addition, on 13 June 2012 the shareholders of the subsidiary Olivetti I-Jet S.p.A. voted to place the company in liquidation.
2012 revenues were €280 million, down €63 million compared to 2011.
EBITDA was a negative €57 million, €21 million lower than 2011. Net of provisions following the liquidation of Olivetti I-Jet S.p.A., the change in organic EBITDA was a positive for €10 million (+27.8%).
EBIT was a negative €65 million, down €22 million from -€43 million of FY 2011.
Organic EBIT grew by €12 million (+27.9%) from -€43 million in 2011 to -€31 million in 2012.
The headcount at 31 December 2012 stood at 778 employees (1,075 at the end of 2011).
Telecom Italia S.p.A. results
The main variations to the corporate perimeter
2012 saw the following variations, which had no significant impact on the results of Telecom Italia S.p.A.:
• Merger by incorporation of TI Audit and Compliance Services S.c.a.r.l. and SAIAT in Telecom Italia; both operations took effect on 1 January 2012.
• Transfer of the “Information Technology” business of Telecom Italia to SSC, subsequently renamed Telecom Italia Information Technology: on 1 November 2012 the transfer of the “Information Technology” business of Telecom Italia to SSC took effect. The operation involved the transfer of the Information Technology business, composed of the Information Technology unit and Information Technology Human Resources and Organization, together with the transfer of 1,177 resources to the new company. Following the operation working relations between Telecom Italia and Telecom Italia Information Technology will continue on the basis of agreements negotiated between the parties.
Revenues amounted to €16,940 million, down €1,105 million (-6.1%) from FY 2011. This is due to the physiological decline in revenues from traditional business in the Consumer (-3.6%), Business (-9.4%), Top (-12.4%) and National Wholesale (-2,4%) segments. However, positive trends were seen in handset sales and revenues from Fixed Broadband and Mobile services in the Consumer segment.
EBITDA amounted to €8,433 million, down €503 million (-5.6%) from FY 2011. The organic change in EBITDA was a negative 5% (-€449 million). The EBITDA margin rose from 49.5% in 2011 to 49.8% in 2012; in organic terms the EBITDA margin stood at 50.7% of revenues (50.1% in 2011).
EBIT came to €944 million (-€246 million in 2011 due to a goodwill write-down for €5,376 million). This includes a write-down of Telecom Italia S.p.A. goodwill of €4,016 million. The EBITDA margin rose from -1.4% in 2011 to 5.6% in 2012.
The organic change in EBIT was -2.6% (-€137 million); in organic terms the margin stood at 30% of revenues (28.9% in 2011).
The net result came to -€1,821 million (-€3,645 million in 2011); excluding non-recurring items including the goodwill write-down and the posting of the IRES tax refund for deductible IRAP on labour costs, the result would be a positive €1,908 million (€1,691 million in 2011).
The headcount at 31 December 2012 stood at 44,606 employees (47,801 at the end of 2011).
Events subsequent to subsequent to 31 December 2012
Dismissal of La7 S.r.l.
On 4 March 2013 the Board of Directors of Telecom Italia Media S.p.A., a subsidiary of Telecom Italia S.p.A., agreed the finalisation of the agreement with Cairo Communication S.p.A. for the sale of the entire stake in La7 S.r.l., with the exclusion of 51% of MTV Italia S.r.l.. On 6 March 2013 Telecom Italia Media S.p.A. and Cairo Communication S.p.A. have signed the agreement concerning the sale of 100% of La7 S.r.l..
The understandings reached foresee the payment to Telecom Italia Media S.p.A. of a sale price of €1 million. Prior to the sale, La7 S.r.l. will be recapitalised to give it a positive net financial position at sale date of not less than €88 million. The capital injection will also serve to bring the shareholders’ equity to an agreed €138 million.
The agreements also foresee the signing of a multi-year contract between La7 S.r.l. and Telecom Italia Media Broadcasting S.r.l. to provide broadcasting capacity.
The sale allows Telecom Italia Group to end its financial support for La7 S.r.l. while keeping the network operator Telecom Italia Media Broadcasting S.r.l. within its own perimeter.
Within the framework of the deal, Telecom Italia S.p.A. undertakes to forgo loans due from Telecom Italia Media S.p.A. totalling €100 million.
Conclusion of the sale is subordinate to the proper authorisations required by law.
Capital increase to service the Long Term Incentives Plan 2010
The Board of Directors, exercising powers granted to it by the Shareholders' Meeting of 29 April 2010, has approved a paid increase in share capital, in tranches, via the issuance of a maximum 576,544 new ordinary shares to be set aside for subscription by the beneficiaries of the 2010 LTI Plan.
Outlook for the 2013 financial year
As announced on 8 February 2013, regarding Telecom Italia Group's outlook for the current financial year, the targets linked to the main economic indicators, as described in the 2013-2015 Industrial Plan, foresee the following:
- Revenues stable YoY.
- Low-single digit percentage reduction in EBITDA.
- Adjusted net financial position of less than €27 billion.
Shareholders’ Meeting Called
The Board of Directors has convened a Shareholders' Meeting for 17 April 2013 (single call) to take place at the Rozzano Auditorium (Milan), Viale Toscana 3.
Besides approval of the annual financial statements at 31 December 2012, the Board will submit a proposal to Shareholders to replenish the loss for the year from retained earnings, as well as to distribute a dividend of 2 euro cents per ordinary share and 3.1 euro cents per savings share, drawn from FY 2010 earnings. The dividend shall be paid out from April 25 2013, ex-coupon on April 22 2013.
The Shareholders' Meeting will be called to give a non binding vote on section one of the Remuneration Report. This document will made available to the public as required by law together with the Annual Report on Operations (and the customary Report on Corporate Governance and Shareholdings, also approved today by the Board of Directors) on the corporate web site, www.telecomitalia.com, under the Governance section, and from company head offices.
New appointments to the Statutory Board of Auditors
The Shareholders will be called to approve changes to the Statutory Board of Auditors with the nomination as effective auditor of Mr. Roberto Capone (replacing Ms. Sabrina Bruno who retired in September 2012), and the appointment of Mr Fabrizio Riccardo Di Giusto as alternate auditor. Both mandates will expire with that of the current Board of Statutory Auditors (approval of the financial statements at 31 December 2014). The new appointments to be submitted to the Shareholders' Meeting are the fruit of prior consultation with Assogestioni, which had previously presented the list from which both Ms. Bruno and Mr. Capone were chosen.
The CVs of Mr. Capone and Mr. Di Giusto are attached.
Employee Stock Ownership Plan
The Shareholders’ Meeting will be called to approve an employee stock ownership plan, similar to the plan launched in 2010. The scheme makes available a total 54,000,000 ordinary shares at a 10% discount off the market price, and in any case not below par value, in possible instalments. Individuals who hold shares for one year, and providing they remain employees, will be granted one free bonus share for every three shares purchased. To service the plan, it is proposed that the Board of Directors be granted powers to increase share capital by a maximum €39,600,000, part paid and part without charge, via the assignment of profits or profit reserves. The powers to increase the share capital described above, with consequent changes to the company by-laws, do not require the approval of the shareholders who do not have a right of withdrawal.
Meanwhile, in view of the current conjunction, the Board of Directors decided to suspend the Long Term Incentives Plan for top management and selected managers for FY 2013.
Corporate Governance Issues
The Board of Directors has ascertained that it fully meets the requisites for the composition of the board and the criteria of independence in the persons of Lucia Calvosa, Elio Cosimo Catania, Massimo Egidi, Jean Paul Fitoussi, Mauro Sentinelli and Luigi Zingales.
The manager responsible for preparing the company's financial statements, Piergiorgio Peluso, declares under comma 2 of Article 154-(ii) of the Finance Consolidation Act that the information presented in this press release corresponds to the results documented in the company accounts and balance sheets.