Telecom Italia Cuts Mobile Projections as it 'Runs Harder to Stand Still' (TI)

| About: Telecom Italia (TI)

Telecom Italia cut its guidance for its mobile unit through 2008:

TIM Brazil, the second largest Brazilian mobile carrier, is now targeted to grow 10% per year through 2008, as opposed to the previous expectation of 18% growth through 2007. EBITDA is projected to grow from 16.3% last year to over 20% this year and over 30% in 2008.

TIM Italy: Annual growth rates were reduced from 3-4% to 2-3%. EBITDA will stay constant through 2008 at the 50.6% level.

The good news for Telecom Italia: TI is one of the best performing incumbents in Western Europe. As Ovum analyst Cesar Bachelet notes, Telecom Italia has made a number of smart moves including capitalizing on broadband growth through its acquisition of French ISP LibertySurf, resulting in more than doubling its non-domestic European broadband operations. TIM Brazil has been a phenomenal success for TI with 48.4% subscriber growth in 2005.

The bad news for Telecom Italia: Much the same as incumbent carriers throughout Europe. They've underperformed the WSJ's index of fixed line carriers over the last twelve months (see chart). Bachelet writes: "Telecom Italia will have to keep running harder just to stand still...Key to achieving [its] less ambitious objectives will be the realisation of the synergies from its recently-introduced One Company model. The fact that successful operators such as Telecom Italia are facing these challenges is an indication of just how tough the market has become."

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