Telecom Italia 3-Yr Plan Sheds
No Light On Global Srategy
By RALPH TRAVIATO
Dow Jones Newswires
ROME -- The release over the weekend of Telecom
Italia SpA's (I.TLI) long-awaited three-year plan shed
no light on the crucial area of the company's international
strategy, analysts said.
Telecom said talks with the U.K.'s Cable & Wireless
PLC (CWP) are proceeding, but didn't provide details,
and on Monday a Telecom spokesman said the two
groups want to set up a global network operating
company, something they've said for months.
"The plan doesn't seem to be giving us any strong
signals, not much detail," AFV Milla SIM
telecommunications analyst Paola Toschi said.
"There are some investment numbers which are in-line
with expectations but what we really need is clarification
of Telecom's international strategy," she said.
In its three-year plan, Telecom said it will spend ITL25
trillion in industrial investment and ITL15 trillion in
financial investments.
Of greater impact were Telecom's first half results which
saw a strong rise in profits thanks to mobile phone unit
Telecom Italia Mobile SpA (I.TIM), analysts said.
On Friday, Telecom Italia reported a first half net profit
of ITL2.5 trillion, up from ITL1.5 trillion a year earlier.
Analysts noted, however, that at parent company,
whose business is mainly fixed-line, revenues were static.
The parent company's first half revenues ITL15 trillion,
unchanged from the first half of 1997, while consolidated
revenues rose to ITL21.9 trillion, up from ITL20.5
trillion.
In early trade Monday, Telecom Italia shares were up in
line with the rest of the market, reflecting the neutrality of
the strategic plan, analysts said.
At 0947 GMT, Telecom Italia shares were up ITL56 or
0.5% at ITL11,500, while the Mib30 index of blue-chip
stocks was up 69 points or 0.3% at 27,521 points.
- - 28/09/98 09-57G
Analysts who were looking for details on global
alliances, were disappointed.
The absence of details regarding international alliances
probably means nothing concrete has been achieved,
and he doesn't expect any developments in the near
future, ABN AMRO SIM telecommunications analyst
Poalo Perella said.
"My impression is that the international situation is no
longer a priority," he said.
However, on its international strategy, Telecom Italia did
say its investment plan would focus of foreign expansion
which it wants to boost to 30% of total business in three
years. It currently accounts for 9.0% of business.
Telecom said it would concentrate on single markets
through acquisitions, partnerships and other alliances,
highlighting the South American market.
In July 30, Telecom Italia and its 60%-controlled mobile
phone operator TIM acquired concessions for one fixed
line and two cellular phone units in Brazil, the biggest of
which was Telesul Celular Participacoes SA.
Meanwhile, analysts welcomed Telecom Italia's late
Friday announcement that 8,000 jobs would be cut
during the next three years.
"Although Telecom's fixed-line revenue didn't grow in
the first half, it didn't shrink either which is quite an
achievement," Perella said. "Obviously they need to
achieve greater efficiencies in that sector so the news of
the job cuts is positive," he said.
Analysts expect that the bulk of these cuts will be in the
fixed-line area. Telecom Italia has a total workforce of
125,000.
Analysts said Telecom Italia's target of 7.0% annual
sales growth over the next three years was ambitious
although not impossible and said growth of 5.0% to
5.5% might be more realistic.
AFV Milla's Toschi noted that, at a strategic level,
Telecom's board decisions appear weak in the context
of a rapidly developing market.
"This plan doesn't seem to provide clear guidelines for
the group in the medium term," Toschi said.
"The sales increase is possible but it would require its
mobile sales to continue growing at current levels and
more revenues from new services like the internet," she
said.
On a positive note, analysts welcomed Telecom's Oct. 5
deadline for an accord with Italian state TV group RAI
over its digital pay-TV unit Stream.
On Friday, Telecom also named Rupert Murdoch's
British Sky Broadcasting Group PLC (BSY) as a good
potential partner in Stream.
"I think that means that Telecom will go ahead, possibly
with Murdoch, if RAI drops out of the picture," ABN
AMRO's Perella said.
"Murdoch's presence could help turn around Stream
which is losing about ITL400 billion a year," he said.
Murdoch's possible entry into Italian broadcasting has
raised alarm in some political quarters, but market
watchers expect his participation will be accepted as
long as majority control of Stream remains Italian.
Stream is currently 100%-owned by Telecom Italia.
According to recent newspaper reports, Murdoch wants
40% of Stream.
Alongside a commitment to increasing value at Stream,
Telecom Italia aims to maintaining 50% of the internet
access market by 2001. It currently holds about 50% of
that business in Italy where the total market is worth
about ITL800 billion.
Telecom reiterated that Italian mobile phone usage
should reach half the population by the year 2002 for a
total market of 30,000 users. Market penetration now
stands at around 30%.
In Sept., TIM said it had 12.5 million clients, up from
11.3 million at the end of June. TIM is Europe's largest
mobile phone operator and holds 74% of the Italian
market.
-Ralph Traviato; 39-06-6782543; rtraviato@ap.org |
