November 4, 2016 / 2:07 PM / 2 years ago

UPDATE 1-Telecom Italia core profit rises on strong domestic business

(Adds details, comments, updates shares)

MILAN, Nov 4 (Reuters) - Telecom Italia posted a slightly better-than-expected 8.5 percent rise in third-quarter core earnings, helped by cost cutting and strong results from its domestic operations.

Italy’s biggest phone group, controlled by French media group Vivendi, said earnings before interest, tax, depreciation and amortisation (EBITDA) rose to 2.152 billion euros ($2.39 billion), a touch above a consensus of analysts’ forecasts provided by the company of 2.098 billion euros.

Sales at the former telecoms monopoly, which is seeking new sources of income as its phone services lose appeal amid competition from Internet rivals, returned to growth in July-September after falling in the preceding two quarters.

They rose 1.4 percent annually to 4.8 billion euros, in line with expectations, helped by new bundled services that include fixed phone, mobile, Internet and TV in one package.

Chief Executive Flavio Cattaneo, who took over at the heavily-indebted group earlier this year, has stepped up cost cutting to make the telecoms group a more nimble player and the strategy is bearing fruit.

Operating margins improved in the quarter and adjusted net debt fell to 26.7 billion euros by the end of September, down by 779 million from three months earlier.

The company is also spending heavily on rolling out an ultrafast broadband network in Italy, hoping to fend off growing competition from the likes of power utility Enel which plans to use its pylons and ducts to lay fibre optic cables.

Telecom Italia confirmed its expectation for a low single digit growth in domestic organic EBITDA this year. The group said its domestic business achieved the best quarterly result since 2007, with core earnings rising 7.9 percent on a 1 percent increase in sales.

There were also positive signs at TIM Participações , Brazil’s No. 2 wireless phone carrier and majority owned by Telecom Italia. The unit’s quarterly results beat expectations, and average revenue per user, an industry bellwether of performance, increased for the third straight quarter.

The stock initially rose after the results but later pared the gains to fall 1.4 percent by 1405 GMT. Traders said that while the market liked the numbers, especially from Italy, the improvements were already priced in.

Reporting by Agnieszka Flak and Stefano Rebaudo; Editing by Keith Weir

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