- Profit Q3 2013: 505 million euros (-191 million euros compared with Q3 2012). consolidated net profit for the nine months: -902 million euros (1,938 million euros in the first nine months of 2012); excluding the goodwill write-down, which affected the first nine months of 2013, the net result is positive by 1.3 billion euros
- Revenues Q3 2013: 6,629 million euros (-1.1% in organic terms compared with Q3 2012). revenues for the first nine months: 20,389 million euros (-2.1% in organic terms compared with the first nine months of 2012)
- EBITDA Q3 2013: 2,697 million euros (-7.1% in organic terms compared with Q3 2012). ebitda for the first nine months: 7,933 million euros (-6.9% in organic terms compared with the first nine months of 2012)
- EBIT Q3 2013: 1,481 million euros (-12.5% in organic terms compared with Q3 2012). EBIT for the first nine months: 1,834 million euros (-12.8% in organic terms compared with the first nine months of 2012); net of goodwill write-down of approximately 2.2 billion euros, the result stands at 4,021 million euros
- Adjusted Net Financial debt as of 30 September 2013: 28,229 million euros; in Q3 2013 alone, the reduction was 584 million euros, down by 1.26 billion euros compared with 30 September 2012
- Operating Free Cash Flow for the nine months: 2,777 million euros, has allowed the payment of dividends and taxes amounting to 1.1 billion euros in total in the first nine months of 2013 to be offset
- The Liquidity Margin as of 30 September 2013 is 13,453 million euros and allows the group's financial liabilities to be covered for the next 24 months
The results of the first nine months of 2013 will be illustrated to the financial community during a call conference scheduled for today 7 November 2013 at 20 pm (Italian time). Journalists may listen to the conference call, without asking questions, by calling: +39 06 33168.
The presentation slides, with an opportunity to follow the event in audio streaming, will be available at www.telecomitalia.com/9M2013/ita. Those unable to connect live may follow the presentation until Friday 14 November 2013 by calling: +39 06 334843 (access code 576493#).
A number of alternative performance indicators are used in this press release which are not provided for in the IFRS accounting standards (EBITDA; EBIT; Organic Change in Revenue, EBITDA and EBIT; Net Financial Book Debt and Adjusted Net Financial Debt). The meaning and content of these are explained in the appendix.
The Interim Report on Operations of the Telecom Italia Group as of 30 September 2013 has been drawn up in accordance with article 154–ter (Financial Reports) of Legislative Decree No. 58/1998 (Consolidated Finance Law [Testo Unico della Finanza]- TUF), as subsequently amended and supplemented. This document also includes the Abbreviated Consolidated Financial Statements as of 30 September 2013, prepared in accordance with the international accounting standards issued by the International Accounting Standards Board and endorsed by the European Union (defined as "IFRS"), and with reference to CONSOB Communication No. DEM/8041082 of 30 April 2008 (Quarterly reporting by listed issuers with Italy as their Member State of origin).
The accounting policies and consolidation principles adopted in preparing the Abbreviated Consolidated Financial Statements as of 30 September 2013 are consistent with those adopted in the Telecom Italia Group Consolidated Financial Statements as of 31 December 2012, to which reference can be made, except for:
- use of the new Standards/Interpretations adopted by the Group as of 1 January 2013, which had no impact on the Abbreviated Consolidated Financial Statements as of 30 September 2013, except for the effects of the prospective adoption of IFRS 13 (Fair value measurement), as stated in the appendix;
- valuation of the goodwill, for which it was not deemed necessary to update the impairment test as of 30 June 2013; it will be performed again when drawing up the annual financial statements as of 31 December 2013, on the basis of expected cash flows from the new Industrial Plan and the information derived from the market.
The Abbreviated Financial Statements as of 30 September 2013 is voluntarily submitted to a limited audit. This activity is currently taking place.
Note that the section "Business Outlook for the 2013 fiscal year", contains forward-looking statements about the Group’s intentions, beliefs and current expectations with regard to its financial results and other aspects of the Group's operations and strategies. Readers of the present press release should not place undue reliance on such forward-looking statements, as final results may differ significantly from those contained in the above-mentioned forecasts owing to a number of factors, the majority of which are beyond the Group’s control.
The Telecom Italia Board of Directors, chaired by Aldo Minucci, today examined and approved the Group’s Interim Financial Statements at 30 September 2013.
Main variations to the consolidation area
The following changes to the consolidation area occurred during 2013:
- La7 S.r.l. - Media: on 30 April 2013, after having received the authorisations provided for by the applicable regulations, Telecom Italia Media completed the sale of La7 S.r.l. to Cairo Communication. Consequently the company left the consolidation area.
- MTV Group – Media: on 12 September 2013, after receiving the authorisations required by the applicable regulations, Telecom Italia Media completed the sale of MTV Italia S.r.l. and its fully-owned subsidiary MTV Pubblicità S.r.l. to Viacom. Consequently the companies left the consolidation area.
The following change occurred in 2012:
- Matrix - Other assets: the company was sold on 31 October 2012, and it consequently left the consolidation area.
Telecom Italia Group
Revenues in the first nine months of 2013 amount to 20,389 million euros, down by 7.6% compared to the first nine months of 2012 (22,061 million euros); the reduction is for the most part attributable to the Domestic (-1.344 million euros) and Brazil (-315 million euros) BUs, while growth is confirmed in the Argentina BU (+48 million euros). The Latin America BUs were particularly affected by exchange rate weaknesses, with average rates worsening by approximately 14% for the Brazilian Real and around 22% for the Argentinian Peso over a period of 12 months. The organic change in consolidated revenues fell by 2.1% (-446 million euros).
In detail, the organic variation in revenues is calculated by excluding:
- the effect of foreign exchange rate fluctuations of -1,178 million euros, mainly regarding the Brazil Business Unit (-673 million euros) and the Argentina Business Unit (-499 million euros);
- the effect of changes to the consolidation area (-57 million euros) referring to the sale of Matrix S.p.A. (Other Assets) on 31 October 2012, La7 S.r.l. (Media) on 30 April 2013 and MTV Italia S.r.l. and its fully-owned subsidiary MTV Pubblicità S.r.l. (Media) on 12 September 2013;
- the effect of a fall in revenues, recorded in the first nine months of 2012, amounting to 9 million euros and due to the conclusion of commercial disputes with other operators.
Revenues, broken down by business unit, are as follows:
- Capital expenditure by the Domestic Business Unit remained largely in line with the same period of the previous year: the increase for the advancement of plans to build out new generation networks (LTE and fibre network) was offset by the reduced requirement for delivery of new plants, due to the commercial slowdown in Fixed-line access;
- the Brazil Business Unit recorded an increase of 26 million euros compared with the same period of 2012 (including a negative exchange effect of 116 million euros); the increase was primarily attributable to the performance of new network investments;
- the Argentina Business Unit recorded an increase in capital expenditure of 34 million euros compared with the first nine months of 2012, inclusive of a negative exchange difference of 68 million euros. Besides the costs of client acquisition, expenditure was aimed at enlarging and upgrading fixed-line broadband services and backhauling to support mobile access development. Moreover, Telecom Personal invested primarily in increased capacity and enlargement of the 3G network to support Mobile Internet growth.
Cash flow from operations stood at 2,777 million euros, down by 1,364 million euros compared with the first nine months of 2012. This result helped offset the requirements resulting from the payment of dividends and taxes in the first nine months of 2013, which amounted to 1.1 billion euros in total.
Adjusted net financial debt as of 30 September 2013 was 28,229 million euros, down by 1.26 billion euros on the figure for 30 September 2012, including 584 million euros in the third quarter alone, and was substantially in line with the figure as of 31 December 2012 (-45 million euros).
Net financial book debt was 29,187 million euros, down by 599 million euros compared with 30 June 2013 (29,786 million euros).
Group headcount was 82,181 , including 53,397 in Italy (83,184 as of 31 December 2012, including 54,419 in Italy).
Domestic revenues, amounting to 12,069 million euros (13,413 million euros in the first nine month of 2012) fell by 10% in reported and organic terms.
With a negative economic scenario - which has worsened despite expectations of a recovery during the financial year - and in a market which, particularly during the first few months of the year, was characterised by fierce competition and accelerated downward pressure on prices (especially in Mobile and traditional services), the fall in revenues was also significantly influenced by discontinuity of a regulatory nature.
Revenues were particularly affected by the entry into force of the new mobile termination rates (MTR), which provide for a further reduction in tariffs of 35% compared with H1 2013 and 61% compared with the same period of 2012. Furthermore, recent AGCom decisions regarding copper network access prices have had a further negative impact of 85 million euros compared with the first nine months of 2012. In its financial statements for the first nine months of 2013, with retroactive effect from 1 January 2013, Telecom Italia applied the values contained in the two draft price measures for 2013 (published in July 2013), relating to wholesale copper network access prices (local loop Unbundling, naked bitstream, shared bitstream services). Excluding the aforesaid impacts of the reduction in the new mobile termination rates and the change in wholesale network access prices, the performance would be -7.1% compared with the first nine months of 2012, with a virtually stable trend in Q3 (-7.2% compared with -7.3 % in H1 2013).
Core Domestic Revenues
Core Domestic revenues amount to 11,403 million euros and fell by 10.2% (12,701 million euros in the first nine months of 2012). The fall in organic terms is 10.3%.
The performance of the individual market segments as compared with the same period of 2012 is as follows:
- Consumer: revenues in the Consumer segment in the first nine months of 2013 amounted to 5,960 million euros in total, down by 625 million euros compared with the same period of 2012 (-9.5%). In Q3 there was however a slowdown in the rate of decline compared to previous periods (-8.9% in Q1 2013, -10.1% in Q2 2013), mainly because of the reduced impact of the reduction in revenues from mobile termination rates (MTR) and - more marginally – the improvement in commercial and competitive performance, also in the Mobile segment. The latter did however record a significant fall in revenues due to stiffer competition and the resulting pressure on prices and churn rates which were a particular feature of Q1 2013. The fall in revenue in the first nine months of the year is in fact mainly attributable to Mobile service revenues (-546 million euros, equal to -16.8%), particularly traditional voice services (-503 million euros, including 266 million euros also attributable to the reduction in MTRs) and Messaging (-67 million euros), only partially offset by the growth in Mobile Internet revenues (+43 million euros). Fixed revenues also fell compared with the first nine months of 2012 by 123 million euros (-3.9%), also attributable to traditional voice services (-147 million euros ), following the contraction in accesses and the reduction in traffic usage, only a small part of which was offset by the growth in Broadband services (+25 million euros).
- Business: Revenues for the Business segment in the first nine months of 2013 amounted to 3,885 million euros, down by 536 million euros (-12.1%) on the same period of 2012. The fall was primarily seen in revenues from services (-517 million euros, -12.3%), including -266 million euros on Mobile (-20.4%) and -273 million euros on Fixed-line (-9.2%). On Mobile in particular this contraction is attributable to the fall in voice traffic revenues, following a dilution of average revenues per unit (ARPU), the aforesaid reduction in mobile termination rates (-93 million euros) and marginally to the loss of human customer base (-0.2% compared with the same period of 2012). On Fixed-line, cooling demand due to the negative economic situation and to the fall in the prices of traditional voice and data services continues to have a dampening effect. These dynamics both in the Mobile and Fixed-line sectors showed the first signs of easing in this last quarter when there was a recovering trend (-10.7% compared with –12.8% in H1 2013).
- National Wholesale: Total revenues in the Wholesale segment in the first nine months of 2013 were 1,430 million euros, down on the same period of 2012 by 126 million euros (-8.1%), a fall entirely attributable to the regulations reducing ULL, Bitstream, Wholesale Line Rental and termination access rates.
International Wholesale Revenues
International Wholesale revenues in the first nine months of 2013 amounted to 935 million euros , down by 115 million euros (-11%) compared with the same period of 2012. The contraction was seen particularly in Voice services (-84 million euros, equal to -11%) following the annual review of bilateral contracts and the transit component, with a consequent focus on renewing higher margin agreements. Revenues were down for IP/Data services (-18 million euros, equal to -8%) primarily in the captive market component. Despite the overall increase in the total bandwidth sold, the market also suffered from the increasingly competitive scenario and the resulting fall in prices. Also down, particularly in the Domestic component, was the multinational companies business segment (-16 million euros, -26 %). Compared with the previous periods, a significant recovery in revenues was however recorded in Q3 2013 compared with the same period of 2012 (-0.6% compared with -13.5% in Q2 2013 and -18.4% in Q1 2013).
Constant attention paid to profit margins on traffic, combined with cost cutting action, therefore resulted in an EBITDA figure of 151 million euros in the first nine months of 2013 which, despite being down in absolute terms (-10 million euros), led to an increase in profits for the first nine months of 2012 of 0.8 percentage points.
EBITDA for the Domestic Business Unit in the first nine months of 2013 amounted to 5,861 million euros, down by 835 million euros on the first nine months of 2012 (-12.5%). EBITDA margin was 48.6%, slightly down on the same period of 2012 (-1.3 percentage points). This result was affected by the decrease in revenues from services (-1,315 million euros, -394 million euros in Q3) and the impact of the Antitrust penalty relating to the A428 proceedings (84 million euros), which were only partly offset by the reduction in quotas payable to OLOs (resulting primarily from the reduction in termination rates) and the efficiency achieved through selective monitoring and containment of operating costs.
Organic EBITDA in the first nine months of 2013 was 5,982 million euros (-729 million euros, -10.9% compared with the first nine months of 2012), with an EBITDA margin of 49.6%, essentially in line with the same period of the previous year (-0.4 percentage points). The percentage fall in EBITDA, net of the aforesaid reduction in wholesale network access prices, would have been 9.6% (-9.7% in Q3).
EBITDA in Q3 2013 was 2,037 million euros, down by 253 million euros compared with the corresponding period of 2012 (-11%). In organic terms, the reduction was 249 million euros (-10.9%).
EBIT for the Domestic Business Unit in the first nine months of 2013 was 1,032 million euros, down by 2,980 million euros compared with the same period of 2012 (4,012 million euros). This performance stems in particular from a 2,187 million euros write-down of the goodwill of the Domestic Cash Generating Unit recorded in the First Half Financial Report as of 30 June 2013, based on the results of the impairment test process.
Organic EBIT in the first nine months of 2013, excluding in particular the aforesaid goodwill write-down, amounted to 3,340 million euros, down by 667 million euros (-16.6%) compared to the same period of 2012 (4,007 million euros). The margin fell from 29.9% in the first nine months of 2012 to 27.7% in the first nine months of 2013.
EBIT in Q3 2013 was 1,179 million euros, down by 228 million euros compared with the corresponding period of 2012 (-16.2%). In organic terms, the reduction was 224 million euros (-15.9%).
Headcount stood at 52,903 employees (53,224 as of 31 December 2012).
(average real/euro exchange rate 2.79132)
The revenues of the Tim Brasil Group were 14,738 million reais, 1,000 million reais higher than in the corresponding period of 2012 (+7.3%). Revenues from services reached 12,359 million reais, up by 2.1% compared to 12,100 million reais in the first nine months of 2012. Revenues from product sales increased from 1,638 million reais in the first nine months of 2012 to 2,379 million reais in the first nine months of 2013 (+45.2%), thanks to the greater penetration of customer bases with high-end handsets (smartphones, webphones and tablets), which is an important lever for developing Data Service revenues.
The ARPU stood at 18.4 reais compared to 18.8 reais in the corresponding period of 2012 (-2.1%). ARPU and service revenue performance were affected both by competitive pressures, which led to a fall in business voice unit prices, and by the reduction in the network interconnection rate for mobile operators.
The total number of lines as of 30 September 2013 was 72.9 million, up by 3.6% compared with 31 December 2012.
Revenues in Q3 2013 were 5,083 million reais, 361 million reais higher than in the same period of the previous year (+7.6%). The growth in services was 107 million reais (+2.6%) and the growth in revenues from the sale of handsets was 254 million reais (+40.8%) compared with Q3 2012.
EBITDA of 3,701 million reais was 115 million reais higher than in the first nine months of 2012 (+3.2%). The EBITDA increase is sustained by the increase in revenues, mainly VAS, partly offset by the higher costs of materials, services and personnel. EBITDA margin was 25.1%, down 1 percentage point on the same period of 2012. In the first nine months of 2012, there were non-organic charges of 42 million reais. In organic terms, in the first nine months of 2013, EBITDA was 73 million reais up on the same period of 2012 (+2.0%); the organic EBITDA margin was 25.1% and 1.3 percentage points down on the same period of 2012.
EBITDA in Q3 2013 was 1,249 million reais, up by 48 million reais compared with the corresponding period of 2012 (+4.0%). In organic terms, the increase was 6 million reais (+0.5%).
EBIT amounted to 1,682 million reais improving by 12 million reais on the first nine months of 2012. This is explained by the higher contribution of EBITDA, partially offset by increased depreciation and amortisation of 104 million reais (2,017 million reais in the first nine months of 2013 compared with 1,913 million reais in the same period of 2012). In organic terms, in the first nine months of 2013, EBIT was 1,682 million reais, 30 million reais down on the same period of 2012 (-1.8%).
EBIT in Q3 2013 was 561 million reais, up by 1 million reais compared with the same period of 2012 (+0.2%). In organic terms, the reduction is 6.8%.
Headcount stood at 11,796 employees (11,622 as of 31 December 2012).
(average peso/euro exchange rate 6.95181)
Revenues were 19,826 million pesos, up by 3,802 million pesos (+23.7%) compared to the same period of 2012 (16,024 million pesos). The main source of revenues for the Business Unit was mobile telephony, which contributed around 74% of consolidated revenues and grew by 26.7% compared with the same period of 2012, thanks to growth in the mobile customer base and to the increase in the ARPU.
The number of fixed lines as of 30 September 2013 was 4,124 thousand, down slightly on the end of 2012 (4,128 thousand lines). Despite the fact that fixed telephone services in Argentina continue to be affected by the freeze on tariffs imposed by the Economic Emergency Law of January 2002, the ARBU (Average Revenue Billed per User) grew by 8.6% compared with the first nine months of 2012, thanks to the increase in additional services and the widespread adoption of new price plans.
Revenues in Q3 2013 were 7,114 million pesos, up by 1,469 million pesos compared with the corresponding period of 2012 (5,645 million pesos).
The total broadband customers portfolio of Telecom Argentina as of 30 September 2013 was 1,669 thousand accesses, up by 40,000 units compared with the end of 2012.
The Personal client base in Argentina grew by 880,000 units from the end of 2012 to reach a total of 19,855 thousand lines, 32% of them with post-paid contracts. Meanwhile, thanks to an increase in the number of high value customers and leadership in the smartphones segment, the ARPU grew by 18.5% to reach 66.1 pesos (55.8 pesos in the first nine months of 2012). Much of this growth is attributable to value added services (including text messages and Internet), which together represent 58% of mobile telephony revenues in the first nine months of 2013.
In Paraguay, the Núcleo client base grew by 4.6% compared to 31 December 2012,
to reach 2,407 thousand lines, 20% of them on postpaid contracts.
EBITDA reached 5,537 million pesos up by 823 million pesos (+17.5% compared with the corresponding period of 2012). The EBITDA margin was 27.9%, down by 1.5 percentage points on the same period of 2012, mainly due to the higher incidence of labour and other operating costs, particularly as a result of the higher tax on gross revenues and the higher cost of provisions for regulatory risks.
EBITDA in Q3 2013 was 1,922 million pesos, up by 339 million pesos compared with the corresponding period of 2012 (1,583 million pesos).
EBIT was 2,452 million pesos, up by 290 million pesos (+13.4%) compared to the first nine months of 2012, essentially as a result of the improved EBITDA, partly offset by higher amortisations and write-downs of non-current assets. EBIT margin was 12.4% of revenues (-1.1 percentage points compared the same period of the previous year).
EBIT in Q3 2013 was 928 million pesos, up by 218 million pesos compared with the same period of 2012.
Headcount stood at 16,654 employees (16,803 as of 31 December 2012).
On 13 June 2012, the shareholders' meeting of the subsidiary Olivetti I-Jet S.p.A. resolved to wind up the company. Furthermore, on 2 July 2013, a resolution was passed to start winding up the Swiss subsidiary Olivetti Engineering S.A..
Revenues in the first nine months of 2013 amounted to 174 million euros, down by 11 million euros on the corresponding period of 2012.
The fall in revenues is due primarily to lower sales of copying and printing, which were down by 11 million euros, including 10 million euros in the Italian market, where customers in small and medium sized companies and professionals are the most exposed to the current crisis in the market, with a fall being recorded in both sales of photocopiers and associated products and in machine rental activities. A 3 million euros fall in the value of supplies to Telecom Italia was also recorded. This fall was offset by an increase of around 2 million euros in revenues from cloud services and solutions (particularly in the Italian market) while the performance of specialised systems and applications held up well in the period in question.
In Q3 2013, revenues were 50 million euros (down 9.1% from the 55 million euros recorded in Q3 2012).
The EBITDA was a negative 28 million euros, up by 30 million euros compared to the first nine months of 2012. In particular, during the first nine months of 2012, the EBITDA was affected by the provision for restructuring costs of 30 million euros made following the launch of Olivetti I-Jet S.p.A. winding-up process. Excluding this provision, the organic variation is equal to zero. The result for the first nine months of 2013 is affected by charges totalling 9 million euros, following the fire on 19 March 2013 which completely destroyed the spare parts warehouse. The total damage incurred by the group following the fire was covered by appropriate insurance policies and on 31 October 2013 the Olivetti group and the pool of insurance companies agreed on a settlement of 19 million euros for the claim as a whole; the associated economic and financial effects will be felt in Q4 2013.
Excluding the charges arising from the destruction of the warehouse, the variation in EBITDA would have been positive by 9 million euros (+32.1%), thanks to steady margins on sales and the reduction in fixed costs. These two phenomena more than matched the lower profits from declining sales.
The reported EBITDA in Q3 2013 was negative by 5 million euros (negative by 20 million euros in the same period of 2012).
The EBIT was a negative 32 million euros, up by 32 million euros compared to the same period of 2012. The organic variation in EBIT, excluding the provision for restructuring costs in the first nine months of 2012, was zero. Excluding the losses due to the destruction of the spare parts warehouse in the first nine months of 2013, EBIT grew by 9 million euros (+28.1%).
The reported EBIT in Q3 2013 was negative by 7 million euros (negative by 23 million euros in the same period of 2012).
The headcount of 724 employees fell by 54 units compared to 31 December 2012.
Outlook for the 2013 financial year
As for the general performance of the Telecom Italia Group for the current year, the goals associated with the main economic and financial indicators for the whole of 2013 are as follows:
- Essentially stable revenues compared with 2012;
- "Mid-single digit" percentage reduction in EBITDA;
- Adjusted net financial debt of less than 27 billion euros.
Please note that actual results may differ, even significantly, from those forecasted for the whole of 2013. Forward-looking information is in fact based on a number of assumptions, believed to be reasonable, with particular reference to competitive performance in the telecommunications market, continuous development of the competition, which is a feature of the TLC business as a consequence of the potential entry of new competitors and the introduction of new and innovative technologies, prospects for growth in the economy and the TLC market, in Italy and in the other markets in which the Group operates, the potential legislative and regulatory developments, the performance of financial markets. By their nature, these assessments involve risks and uncertainties arising from multiple factors, most of which are beyond the Group's control.
The main factors include:
- Changes in the general macroeconomic situation in the Italian, European and South American markets, and the volatility of financial markets in the "Euro zone":
The global economic crisis and the continuing weakness of the Italian economy over the past few years have negatively affected the telecommunication business. The continuation of this crisis may reduce purchases of products and services and adversely affect the Group's results, cash flows and financial situation.
Operations and investments may be adversely affected by developments in the overall, as well as economic, situation of the countries where the Group is present.
Fluctuations in exchange rates and interest rates could adversely affect Telecom Italia Group's results.
- Changes in business conditions:
Intense competition in Italy and other Countries could reduce the market share for the Group's telecommunication services and may result in falling prices and margins, with a resulting adverse effect on operating results and financial position. In particular, mobile communication markets are mature markets and the competitive pressure has further increased.
A general slowdown is taking place in the Brazilian economy. This has had an effect on the mobile phone market, which is also affected by an increasing amount of competition and competitive pressure on prices. The continuation of these effects may have negative consequences on the development prospects of the Company and/or the Group in Brazil.
Business performance and cash flow could be adversely affected if new services to encourage greater use of our fixed and wireless networks could not be implemented. Continuing rapid changes in technology could increase the level of competition, reducing the use of traditional services and requiring us to make further substantial investments.
- Changes in legislation and regulations:
As the Group operates in a highly regulated industry, decisions take by supervisory and regulatory Authorities, including those regarding regulated tariffs, as well as changes in the regulatory framework could adversely affect business performance.
- Outcome of disputes and litigation with regulatory authorities, competitors and other entities:
The Group has to deal with disputes and litigation with tax authorities, regulators, competition and market authorities, other TLC operators and other entities. The potential impacts of these proceedings are generally uncertain. In the event of an unfavourable outcome for the Group, these issues could, individually or collectively, have a negative impact on operating results, financial position and cash flows.
- Financial risks:
The aforementioned unfavourable macroeconomic and market environment requires us to consider a lowering of the credit rating by rating agencies as one of the potential risks faced by the Group.
The Group's bond issues do not contain financial covenants (such as Debt/EDITDA, EBITDA/Interest or similar ratios) or clauses forcing the early repayment of loans in circumstances other than insolvency.
The risks and/or impacts of a potential lowering of the credit rating on future refinancing, on the costs associated with it and on the process of evaluating goodwill cannot currently be estimated. The increased risk for our financial counterparts that would result from a potential lowering of Telecom Italia's credit rating could result in an increase in the costs associated with managing the Group hedging derivatives portfolio, costs which cannot currently be estimated either.
The Manager in charge of preparing the corporate accounting documents, Piergiorgio Peluso, hereby declares, pursuant to subsection 2, Art.154-bis of Italy’s Consolidated Finance Law, that the accounting information contained herein corresponds to the company’s documentation, accounting books and records.