The Telecom Italia Board of Directors, which met today under the chairmanship of Roberto Colaninno, examined the transaction which will integrate Tin.it and Seat Pagine Gialle, and Telecom Group and parent company preliminary results for the 1999 financial year. These figures, which will form the basis of the financial statements to be submitted for approval to a forthcoming Board meeting, are being made public at the request of Italian stock market regulatory authority Consob, and as stated in the Telecom Italia prospectus for the buyback of its own savings shares.
Tin.it-Seat Operation
- With regard to this operation, the Board:
Has resolved, with regard to preferential treatment of Telecom Italia shareholders, previously announced in prior releases, that in terms of the assignment of rights and/or shares in the new Tin.it-Seat company, savings shareholders shall receive a treatment equal to that reserved for ordinary shareholders. - Has, in agreement with the other shareholders in Seat Pagine Gialle, established that the increase in the Telecom Italia holding in Seat Pagine Gialle to 29.9% of the ordinary capital shall take place through the purchase of Seat Pagine Gialle ordinary shares owned directly or indirectly by the same majority company shareholders.
- Has noted that, since full agreement has been reached between Telecom Italia, the other majority shareholders and Seat Pagine Gialle management regarding the principal aspects of the aggregation between Tin.it and Seat, the definition of certain technical aspects of the financial and corporate structure is well underway. Definition of these aspects will depend in part on responses to queries that have been submitted to the Consob.
- Has examined evaluation criteria for the assets object of this transaction, on the basis of which decisions shall be made on the relative exchange ratio, and on which the parties concerned have expressed full agreement.
The Board has therefore decided to meet again on March 15 in order to pass definitive resolutions regarding financial structure, exchange ratios, and modalities of execution of the transaction.
1999 Financial Year Results
Telecom Group
Group revenues, gross of sums destined to other telecommunications carriers, reached 52,481 billion lire (27.1 billion euros), an increase of 8.2% compared to the figure of 48,507 billion lire (25.1 billion euros) posted the previous year. Net of sums destined to other carriers, revenues stood at 47,855 billion lire (24.7 billion euros), up 5.3%.
This increase in revenues is the result of positive trends in mobile telecommunications services, which have also benefited in particular from entry into consolidation of Brazilian companies Tele Celular Sul and Tele Nordeste Celular. These positive trends have, in part, been offset by a contraction of turnover in fixed telephony and in the installation and manufacturing sectors.
At 23,673 billion lire (12.2 billion euros), EBITDA was up 785 billion lire (405 million euros) (+3.4%) compared to 1998, with an incidence on gross revenues of 45.1% (47.2% in 1998). The increase in EBITDA is substantially due to the positive contribution of TIM, whose EBITDA grew by over 1000 billion lire (500 million euros), and to a lesser extent by the extension of the consolidation perimeter of international activities. These contributions have in part been offset by the trend in fixed telephony, where EBITDA was down 814 billion lire (420 million euros), and in the manufacturing and installations sectors.
Operating profits amounted to 12,456 billion lire (6.4 billion euros), an increase of 3,270 billion lire (1.7 billion euros) over 1998 (+35.6%), with an incidence on gross revenues of 23.7%, against 18.9% in 1998.
Profits before extraordinary items and taxes amounted to 10,706 billion lire (5.5 billion euros), an increase of 17.9% over 1998. Profits before taxes and minorities amounted to 9,711 billion lire (5.0 billion euros), + 5.4% over the previous year.
The 1999 financial year concluded with net consolidated income of 3,364 billion lire (equal to 1.7 billion euros, 4,665 billion lire or 2.409 billion euros net of 1,301 billion lire or 672 million euros owing to minorities), down 466 billion lire or 241 million euros (-12.2%) from the previous fiscal year, which was determined also by start-up costs of a few important foreign participations of the Group. It should also be recalled that the result of 1998 was strongly influenced in positive terms by gains deriving from sales of participations and from extraordinary income resulting from changes in accounting criteria for reporting pre-paid taxes.
Net financial indebtedness at 31 December 1999 was 15,758 billion lire (8.1 billion euros), against 15,826 billion lire (8.2 billion euros) at the end of 1998.
Group personnel at 31 December 1999 stood at 122,662 employees, down 1,304 compared to 31 December 1998. This was essentially brought about by a reduction in parent company staff numbers (-3,395).
This reduction was partially offset by an increase in the consolidation area (+ 2025) and an increase in staff at TIM (+482). A further contribution to the overall reduction in the Group personnel also came from a decrease in the manufacturing sector (-2398), resulting from restructuring of the Italtel Group and, on the other hand, increases in the installations industry (+2,060), particularly due to business development in Brazil.
Parent Company Telecom Italia S.p.A.
The parent company posted revenues, (gross of sums destined to other domestic and international telecommunications operators, registered at 6,321 billion lire, or 3.3 billion euros) of 35,856 billion lire (18.5 billion euros), down 1.2 % with respect to the 1998 financial year, when the figure was 36,292 billion lire or 18.7 billion euros.
This reduction may be principally ascribed to gross traffic revenues, whose value fell by 6.4% despite an 11.6% increase in minute terms. Interconnection access revenues from new fixed network operators reached 708 billion lire (366 million euros) (44 billion lire or 23 million euros during 1998).
At 15,446 billion lire (8.0 billion euros), EBITDA was down 814 billion lire (420 million euros) on 1998 (-5%), as a result of lower revenues, accounting for an incidence on revenues of 43.1% against 44.8% the preceding year.
Operating profits amounted to 7,108 billion lire (3.7 billion euros), an increase of 2,066 billion lire or 1.1 billion euros on 1998 (+41%), principally the result of lower charges compared to the 1998 financial year, with regard to fixed capital investment (amortization, capital loss and writing down). Incidence on revenues was 19.8%, against 13.9% in 1998.
1999 concluded with a net profit of 5,050 billion lire (2.6 billion euros), 2,260 billion lire (1.2 billion euros) (+ 81%) up on the 1998 figure, which was 2,790 billion lire (1.4 billion euros).
This performance was influenced by a reduction in depreciation of material fixed assets, lower write-downs of fixed assets (in 1998 write-downs and other charges associated with the Socrate and DECT platforms equaled 2,098 billion lire or 1.1 billion euros) and an increase in dividends from subsidiary companies. The positive effects of these events outweighed the reduction in EBITDA brought about by increasing competition and a resulting drop in tariffs.
Net financial indebtedness at the end of 1999 stood at 16,068 billion lire (8.3 billion euros), up 140 billion lire (72 million euros) compared to the end of 1998.
Parent company personnel numbers fell from 79,508 at the end of 1998 to 76,113 on Dec. 31, 1999, a reduction of 3,395 employees (-4.3%).
Milan, 1 March 2000