August 5, 2011 / 6:15 AM / in 8 years

UPDATE 3-Telecom Italia posts 2 bln euro loss after writedown

* H1 loss 2.01 bln euros after 3.18 bln euro goodwill charge

* Confirms outlook, dividend policy, debt-cutting plans

* Revenues, profit excluding charge beat forecasts

* Shares up 8 pct

(Recasts, adds analyst comments, background, share surge)

By Deepa Babington

ROME, Aug 5 (Reuters) - Italy’s biggest telecoms operator Telecom Italia posted a 2 billion euro first-half loss after taking a goodwill writedown related to earlier dealmaking.

The company blamed “the deterioration of the financial markets” for the 3.18 billion euro goodwill writedown. But it said the market turmoil would have no impact on its debt, citing large liquidity margins and no refinancing needs.

Chairman Franco Bernabe acknowledged operating in “uncertain” and “extremely challenging” times, but sounded confident of sailing through them.

“There is a great deal of uncertainty on the side of consumers, but policies we have been pursuing have proven to be very welcome, so I don’t see any impact,” Bernabe said, referring to the impact of the country’s austerity package’s on the company’s Italian mobile unit.

The former monopoly stuck to its forecasts for the year, despite the goodwill writedown, citing improving trends at its key domestic business.

Analysts had said a writedown on goodwill stemming from a buyout of minorities at its mobile unit in 2005 and another deal involving its parent holding in 2003 was expected as economic turmoil was prompting companies to be cautious in valuations.

“If sovereign debt fears faded, Telecom Italia is quite attractive,” said Sanford C Bernstein analyst Robin Bienenstock, pointing to the company’s cheap valuation and confirmed forecasts.

“Italian macro is a worry, but one on everyone’s horizon.”

Telecom Italia has felt the heat from Italy’s glum economic outlook as well as fears that the euro zone’s third largest economy could become the next focus of region’s debt crisis. This has helped drive its shares down 18 percent in the past three months.

SHARES SURGE

Shares of Telecom Italia opened nearly 2 percent lower before rebounding sharply. They were up 8 percent at 0.86 euros at 1111 GMT, outperforming Milan’s blue-chip index that was up 0.7 percent.

“There’s a return of interest in Telecom Italia because it is considered a defensive stock,” said Oriana Cardani, analyst with Centrobanca in Milan. “If there was further slowdown in the economy we would see an impact on its mobile division, but much more limited compared to cyclical stocks.”

Excluding the writedown of goodwill, the company reported first-half profit of 1.17 billion euros, just above the Thomson Reuters I/B/E/S average forecast of 1.12 billion euros.

The company confirmed revenues and EBITDA would be broadly stable this year and that debt would fall to 29.5 billion euros.

Revenues rose 10 percent to 14.54 billion euros, above the average forecast of 14.47 billion euros, boosted largely by the company’s fast-growing operations in Brazil and Argentina.

Telecom Italia, which is controlled by a group of Italian investors and Spanish rival Telefonica , has in recent years relied on its Brazilian operations to drive growth and offset declines in its sluggish home market.

Revenues at its closely-watched Italian mobile unit fell 10.5 percent, but were now shrinking at a slower pace and the company cited prospects for further improvement this year.

Locked in a fierce price war with rivals Vodafone and Wind, the unit has struggled since it began focusing on higher-value customers last year and investors have been seeking signs of a turnaround. The company said prices had begun to stabilise now.

Bernabe also hinted that the company might be interested in making an acquisition in the Italian mobile market, though he said Telecom Italia was not involved in talks at the moment.

Telecom Italia has so far not commented on an Italian newspaper report this week suggesting that it could buy smaller rival 3 Italia, which is owned by Hutchison Whampoa .

“We think there is potential for consolidation, we are not currently in negotiations,” Bernabe said. “We think we could be a consolidator but I think for the time being there is nothing concrete, it’s too early to say.”

(Additional reporting by Stefano Rebaudo. Editing by Jane Merriman)

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