UPDATE 3-T.Italia Q1 profit falls 35.4 pct, below estimates
(Adds analyst comment)
MILAN, May 9 (Reuters) - Telecom Italia (TLIT.MI), Europe's fifth-largest telecoms group by market capitalisation, reported a worse than expected 35.4 percent drop in first-quarter net profit on lower sales and falling profit margins.
Net profit fell to 501 million euros ($774.5 million), the company said on Friday, compared with the average forecast of 512 million from 16 analysts polled by Reuters.
The main drag on results was falling fixed-line sales and margins due to stiffening competition in Italy as broadband companies such as Fastweb (FWB.MI), taken over by Swisscom (SCMN.VX) last year, win a greater share of business.
The company -- 10 percent indirectly owned by Spain's Telefonica (TEF.MC) -- also cut its sales growth guidance for its Brazilian mobile phone unit and its German broadband unit.
However, Chief Executive Franco Bernabe said Telecom Italia would meet its group targets for this year thanks to cost cuts.
"Globally we are experiencing some problems," Bernabe told analysts during a conference call. "I'm confident we will meet our 2008 targets."
On March 7 Telecom Italia said it was targeting 1-2 percent a year revenue growth between 2008-2010 and earnings before interest, tax, depreciation and amortisation (EBITDA) of 39 percent of revenues. The company sees 2008 sales of 31 billion euros and an EBITDA margin of 38.5 percent.
"Meeting management's 12 billion euro clean EBITDA target for 2008 is beginning to look challenging, and guidance for TIM Brasil and European Broadband has already been reduced, only two months after it was given," Morgan Stanley analyst Nick Delfas said in a note on Friday.
He rates the company "underweight."
First-quarter EBITDA fell 6.7 percent to 2.97 billion euros. The EBITDA margin, a key measure of profit, fell to 40.8 percent of sales from 42 percent a year ago. Sales fell 2.4 percent to 7.3 billion euros.
FRANCE, BOLIVIA
Bernabe said Telecom Italia had received three firm offers for its French unit Alice. French broadband communications provider Free (ILD.PA), telecoms group Neuf Cegetel NEUF.PA and the privately held cable group Numericable have said they have bid.
Contradicting several press reports, Bernabe said Telecom Italia has not made an offer for Italian broadband operator Tiscali (TIS.MI). Tiscali is for sale and will discuss the bids it has received on May 12. Continued...
