Facing falling margins and stiffening competition at home and abroad, Telecom Italia Wednesday unveiled a business plan that would allow the company to reduce its debt and trim costs through an additional 4,000 job cuts and disposal of noncore assets valued at as much as $3.8 billion.
The 4,000 job cuts come on top of the 5,000 announced in June. Together, the moves will reduce Telecom Italia's work force by 14%, to 55,000 from 64,000. "The conditions that have emerged on the market and in the real economy mean it is necessary to be even more incisive in our priority of debt reduction," Chief Executive Franco Bernabè said.
Telecom Italia. the former telecommunications monopoly, pledged to reduce its ratio of debt to earnings before interest, taxes, depreciation and amortization to 2.9 times by the end of next year and to 2.3 times by the end of 2011, from about three times at the end of 2008.
Bernabè said the company's growth will come from Italy and Brazil. German broadband unit HanseNet is among the assets earmarked for a possible sale, he said. Telecom Italia said it has received expressions of interests in some of its assets but said it was too early to talk about prices.
The company also said it intends to expand its presence in Argentina by exercising its call option to increase its shareholding in Sofora SA, with the support of a local partner.
The new business plan has been anticipated for months, as Telecom Italia shares have halved in value from a year earlier. At the same time, the Italian communications regulator wants the company to open further its fixed-line network to rivals. Its recent third-quarter results, however, beat expectations and the company confirmed its forecasts in a sign that the new management's cost-cutting strategy has started to pay off. (info from The Wall Street Journal)
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