MILAN, May 13 (Reuters) - Telecom Italia more than doubled the cost cutting target in its business plan to 2018 after reporting a larger-than-expected 16 percent drop in first-quarter core profit, hit by one-offs and persistent weakness in its key Brazilian market.
In the first set of results under new CEO Flavio Cattaneo, Italy’s biggest phone group said earnings before interest, tax, depreciation and amortisation (EBITDA) fell to 1.712 billion euros ($1.93 billion), below a consensus of analysts’ forecasts of 1.796 billion euros provided by the company.
Cattaneo replaced Marco Patuano who resigned in March after what sources close to the matter said were clashes over strategy with Vivendi since the French media group became Telecom Italia’s top shareholder with a 24.7 percent stake and secured four seats on its board.
In a statement on Friday, Telecom Italia said it had raised its savings target to 1.6 billion euros from the 0.6 billion euro goal disclosed in February, in a move widely seen as an attempt to appease Vivendi which has been pushing for a faster turnaround of the heavily indebted Italian group.
The cuts would be achieved by reducing costs of labour, energy, commercial activities such as advertising and by streamlining of its IT and network platforms, it said.
Sales at the former telecoms monopoly, which is seeking new sources of income as its traditional phone services lose appeal amid competition from Internet rivals, fell 12 percent in the quarter to 4.44 billion euros, slightly below expectations.
Sales were down 2 percent in Italy but slumped 37 percent in Brazil, where rising unemployment and inflation during the worst economic downturn in decades have weighed on disposable income for cell services.
Adjusted net debt fell to 27.14 billion euros at the end of March from 27.28 billion euros three months earlier, helped by the conclusion of the sale of its stake in Telecom Argentina. (Reporting by Agnieszka Flak, editing by Valentina Za)