Telecom Italia expects loss

February 14, 2002 Posted: 1126 GMT

MILAN (CNN) -- Telecom Italia, Europe's fourth largest telecom operator, said full-year net income is expected to be "negative" after it sold businesses to cut debt.

Although not under the same pressure to slash debts as its European rivals, Telecom Italia is pruning its international operations and holdings to focus on increasing investment and growth in high-speed phone services.

Chairman and Chief Executive Marco Tronchetti Provera has outlined plans to raise 5 billion ($4.8 billion) to cut debts of 24 billion.

At the same time it plans to maintain a policy of a high dividend, which has made its stock the best performing among its peers this year, to enable its parent Olivetti to reduce its debts of 17 billion.

On Thursday, Telecom Italia said revenue rose 13.2 percent to 30.8 billion in 2001. Analysts polled by Reuters had expected sales in the range of 31.9 billion to 32.5 billion.

Telecom Italia said its EBITDA (earnings before interest, tax, depreciation and amortisation) grew 12.3 percent to 13.7 billion, less than the 14.4 billion analysts predicted.

Olivetti said its net debt dropped to 16.3 billion at the end of 2001 from 17.5 billion at the end of September while group net debt fell to 38.2 billion from 42.3 billion three months earlier.

Telecom Italia said its net debt came in at 21.9 billion euros in 2001 and forecast it would fall to under 15 billion by the end of 2004.

Provera told analysts the company could make acquisitions in the future, but it was focussed on improving its earnings and investing 16 billion in the next three years. It plans to spend 7 billion each on its fixed line and mobile phone networks.

Telecom Italia also plans to develop wireless networks in South America by integrating its Brazilian businesses and strengthening operations in Peru, Bolivia, Chile and Venezuela.

Tronchetti Provera became the new chairman of Italy's biggest phone operator after his company, Pirelli, took a large stake in Telecom Italia owner Olivetti, which acquired the phone operator two years ago in Italy's biggest hostile takeover.

Pirelli, along with Italy's Benneton family, took control of the phone company by buying 23 percent of Olivetti, which owns 55 percent of Telecom Italia, for 7 billion. The complicated deal gave the tyre and cable manufacturer, and Benetton, control of the phone giant, and also Italy's largest mobile phone company TIM.