By Mauro Orru

 

Telecom Italia SpA's shares rose Wednesday after it posted better-than-expected results for the second quarter and raised the prospect of a possible decision on creating a single national broadband network at the end of August.

At 1115 GMT, Telecom Italia shares traded 5.7% higher at EUR0.39.

The Italian telecommunications company said second-quarter net profit contracted to 118 million euros ($139.3 million) from EUR386 million in the second quarter of 2019. The company recorded EUR69 million in non-recurring charges attributable to the coronavirus pandemic in Italy in the first half.

Earnings before interest and taxes dropped to EUR509 million from EUR1.20 billion, while earnings before interest, taxes, depreciation, and amortization fell to EUR1.66 billion from EUR2.45 billion.

Quarterly revenue fell to EUR3.80 billion from EUR4.52 billion amid reduced footfall in shops during lockdown and lower tourist flows, which harmed roaming traffic volumes.

Domenico Ghilotti, analyst at Italian investment bank Equita Sim, pointed out results were slightly above expectations, with domestic revenue declining 10.7% for the first half of the year instead of 11.8% as expected.

However, "the main focus will be on the progress around the creation of the single network in Italy, as the government reportedly intervened during the board meeting to convince both Telecom Italia and KKR & Co. to postpone the decision for the partial sale of the network to the end of August," said analysts at U.S. bank Citi.

KKR previously submitted an EUR1.8 billion offer to be Telecom Italia's exclusive partner in fiber-network development and take a 37.5% stake in its fixed network. However, the Italian telecommunication company is also looking at possible forms of integration between its own and wholesale operator Open Fiber's optical-fiber networks. Open Fiber is a 50:50 joint venture between Enel SpA and Italian state lender Cassa Depositi e Prestiti.

Citi analysts said the Italian government's intervention showed its commitment to establishing a single network--a national broadband grid--as Telecom Italia has extra time to secure a merger with Open Fiber on good terms.

"The single network project has a sharp acceleration and finally a more certain timing," said Mr. Ghilotti.

 

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

 

(END) Dow Jones Newswires

August 05, 2020 07:31 ET (11:31 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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