Telecom Italia cuts 2021 core profit goal after DAZN deal
MILAN (Reuters) -Telecom Italia (TIM) said on Monday it would miss a goal to stabilise core profit this year due to higher costs linked to a partnership with streaming service DAZN to distribute Italy’s top-flight soccer matches.
The accord will lift revenues and core earnings in successive years, TIM said, adding that core profit in 2021 would also suffer because of delays to a government plan to boost digital take-up through vouchers for households and firms.
“Market conditions remain very challenging,” TIM CEO Luigi Gubitosi said in an interview with the Monday supplement of Corriere della Sera daily.
“We had a goal to stabilise domestic revenues in 2021 and we’ll meet that. Core profit however will be affected by the soccer partnership kicking off and the delays in the voucher programme,” Gubitosi said.
DAZN has won domestic rights to screen Italy’s Serie A soccer championship for the next three seasons and sealed a technological and distribution deal with TIM.
TIM said it expected organic earnings before interest, tax, depreciation, amortisation (EBITDA) and lease costs to drop by a low- to mid-single digit this year, versus a previous forecast for stable to low-single digit growth.
The situation will improve in following years thanks to the partnership with DAZN, European Union funds to support the post-COVID recovery and the transformation TIM is undergoing, Gubitosi said.
Under a recently announced three-year plan TIM is also betting on so-called adjacent businesses, such as cloud, cybersecurity and pay-TV services.
“We see this as bad as a profit warning can be, in spite of unchanged FCFE [free cash flow equity] targets and expected acceleration in 2022/23 EBITDA,” analysts at Milan’s Banca Akros said, adding however that a “a mid-single digit share price decline could offer an interesting entry point” on the stock.
The company’s shares were 2.7% lower by 0739 GMT.
TIM forecasts low- to mid-single digit growth in organic service revenue in 2022-2023, versus a previous forecast for low-single digit growth.
It expects core profit to show mid-single digit growth over the same period, from low- to mid-single digit growth previously.
The company reiterated a forecast for a “stable to low” single-digit growth for this year’s organic service revenues and confirmed its dividend distribution policy of 1 euro cent for ordinary shares and 2.75 euro cents for savings shares.
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