Telecom Italia became the latest company to highlight the tough conditions in its sector on Wednesday, projecting slowing revenue growth for the next few years and flat margins.
Olimpia, the company’s largest shareholder which is controlled by Pirelli, the tyre company, also wrote down by about €1bn the value of its investment in Telecom Italia.
Marco Tronchetti Provera, the chairman of TI, Olimpia and Pirelli, outlined a strategy to 2008 yesterday which aims to maintain TI’s dividend level and squeeze more synergies and productivity out of the group.
There could also be more than €1bn in disposals of some businesses in France and the Netherlands as well as property.
Last month Vodafone of the UK said it would cut between £23bn-£28bn from goodwill on its balance sheet. It said competition and the threat of technologies such as internet telephony would hamper growth in mature markets.
Mr Tronchetti believes that TI is better placed than its rivals. He has put in place a business model based on the full integration of the company’s fixed line and mobile arms, which he hopes will convince investors of TI’s productivity.
Mr Tronchetti told the Financial Times: “Sooner or later when the turmoil has passed about regulation, internet telephony [and other changes], the market will understand that we have continued to grow our productivity and apply a different multiple to [our shares].”
Telecom Italia, one of Italy’s largest companies, on Tuesday said its 2005 revenues were up 5.8 per cent over 2004 at almost €30bn. It yesterday said its organic revenue growth was forecast to be 3-4 per cent to 2008. It said margins would be flat in the period. It cited a slowdown in Italy’s growth in 2005 for its impact on telecoms and added that the liberalised market in Italy had “resulted in a further reduction in prices to the benefit of end users”.
Olimpia is revaluing its stake in Telecom Italia at €4.23 a share from €4.63, a write-down of €1bn but still far higher than Wednesday’s TI share price of €2.38.