Telecom service provider Telecom Italia is expecting Capex (capital spending) of $4.78 billion in Brazil and $12 billion in Italy in the next three years.
The primary focus would be on network upgrades in Brazil.
In Italy, the group will invest in fiber broadband and LTE. Out of 9 billion euros over three years, the company will invest 3.4 billion euros in latest generation in Italy: It will spend 1.8 billion euros to develop fixed ultrabroadband using optical fiber for the access segment; 900 million euros for mobile broadband; approximately 700 million euros in creating new data centers for cloud computing and international fiber connections.
Telecom Italia says the increase in innovative investments, which will reach 50 percent of the total in 2016, will give great impetus to the development of both fixed and mobile broadband, rolling out the two technologies faster than in the preceding 2013-2015 plan: by 2016 NGN will reach over 50 percent of the population, with 12.4 million homes connected; mobile LTE will cover 80 percent of the population.
In Brazil, the traditional voice-based component continues to be valued, while at the same time the data segment is accelerating through the development of 3G and 4G infrastructures.
TIM Brazil, a mobile telephone operator controlled by Telecom Italia, expects earnings before interest, taxes, depreciation and amortization, or EBITDA, to grow at an annual rate during the period of about 5 percent.
Revenues, according to an investment plan filed with stock market regulators, would also grow at roughly the same rate through 2016.
Meanwhile, Telecom Italia will sell its Argentina unit and other assets while issuing a convertible bond, aiming to raise $5.3 billion to strengthen operations in Italy and Brazil.
Italy’s biggest telecoms operator, which is in the middle of a strategy shift under new Chief Executive Marco Patuano, said it had received an unsolicited offer for its 22.7 percent stake in Telecom Argentina and planned to sell.
It also plans to sell and lease back more than 17,000 mobile towers it owns in Italy and Brazil, and unload an Italian digital broadcasting unit, aiming to reap more than 2 billion euros from these deals.
The moves represent a major change for the debt-laden former Italian telecom monopoly and show the influence that its largest shareholder, Spain’s Telefonica, is having after it agreed to raise its ownership of the holding company that owns 22.4 percent of Telecom Italia.
Patuano’s new strategy, which has been backed by Telefonica, aims to chart a course out of Telecom Italia’s high debts and deteriorating business in its home market by ploughing money into upgrading its creaky Italian network.
Telecom Italia said nine month revenues fell 7.6 percent to 20.38 billion euros, dragged lower by weakness in its recession-hit domestic business, while core profits fell 10.5 percent to 7.93 billion euros.
Capital spending in nine months
Capital expenditure amounted to 3,453 million euros, up by 73 million euros (+2.2 percent) compared with the first nine months of 2012.
Capital expenditure in Italy remained largely in line with the same period of the previous year: the increase for the advancement of plans to build out LTE and fibre network was offset by the reduced requirement for delivery of new plants, due to the commercial slowdown in fixed-line access.
TIM Brazil recorded an increase of 26 million euros, primarily attributable to the performance of new network investments.
Argentina recorded an increase in capital expenditure of 34 million euros compared with the first nine months of 2012. Expenditure was aimed at enlarging and upgrading fixed-line broadband services and backhauling to support mobile access development. Moreover, Telecom Personal invested primarily in increased capacity and enlargement of the 3G network to support Mobile Internet growth.
