Telecom Italia may buy Italian mobile biz of Hutchison

Telecom Lead Europe: Telecom Italia is likely to buy Italian mobile business of Hong Kong conglomerate Hutchison Whampoa.

Media reports suggest that the possible deal would be a bid by Telecom Italia to strengthen its cellphone unit and bring new resources to the debt-laden company.

Hutchison Whampoa’s 2012 interim report says that 3 Italy is adversely affected by the reduction in incoming mobile termination rates while the outgoing rates remained at a high level during December 2011 to June 2012.

Despite the adverse regulatory and economic environment, 3

Italy was able to maintain its profitability through stringent cost

controls and benefiting from the renegotiation of certain network service contracts.

Looking forward to the second half of the year, the regulated mobile termination rates further reduced in July 2012 from €6.3 cents to €3.5 cents for incoming calls and from €5.3 cents to €2.5 cents for outgoing calls. Consequently, 3 Italy is expected to benefit from a lower cost base, which will enhance its customer services margin.

Between December 2011 and June 2012, 3 Italy posted revenues of €920 million, up 6 percent against €870 million.

3 Italy had blended ARPU (f0r 12 months) of €19.02, while the non-voice ARPU was €7.95.

Media reports say the deal will assist Telecom Italia to strengthen its weakening mobile business in Italy and possibly bolster the group’s weak overall financial performance, according to analysts.

Moody’s Investors Service recently downgraded the company’s rating to just one notch above junk, warning that further downgrades are possible.

The possible merger would aggregate two of the current four main mobile operators in Italy, with the others being Wind and Vodafone Italy.

According to Italian regulator Agcom, Telecom Italia’s market share of the mobile business stood at almost 35 percent in the third quarter last year, while H3G’s Italian business held 10.4 percent market share.

Earlier this year, Telecom Italia posted a 5.8 percent decline in 2012 revenue for its domestic mobile business compared with a year earlier, which stood at 6.6 billion euros ($8.5 billion) against €7.1 billion in 2011.

Telecom Italia’s net debt stood at €28.27 billion at the end of 2012, down from €30.41 billion a year earlier, but above its year-end target of €27.5 billion.


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