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Telecom Italia on Wednesday said it will cut 5,000 jobs through 2010, a move that will increase costs this year to yield savings of €300 million a year once the job reduction is complete.

The Reuters report said the operator plans to spend €350 million this year, €250 million more than forecast in March, to cut staff.

“They will mainly impact 2008 results and the relative targets announced in March and will be more than offset by savings expected in the next two years,” Telecom Italia said in a statement.

On March 7 Telecom Italia said it was targeting 1-2% a year revenue growth between 2008-2010 and earnings before interest, tax, depreciation and amortization (EBITDA) of 39% of revenues.

Telecom Italia has about 83,400 employees.

The former monopoly also said it created a Domestic Market Operations Division integrating its fixed, mobile and top clients structures.

The new unit, to be headed by Oscar Cicchetti, will focus on customer segments rather than on mobile or fixed-lined clients. Integrating marketing, sales and field service operations will allow Telecom Italia to save money and be more competitive, it said.

Chief executive Franco Bernabe, named in December, has promised more efficiency and better customer care to stem a decline in profits.

He is struggling with a mountain of debt. The result of three leveraged buyouts in 10 years, the debt pile of more than €35 billion towers over Telecom Italia’s market capitalization of €25 billion.

Bernabe has put the French broadband unit, Alice, on sale but he has little else to cede.

Previous management already sold businesses across Europe and Latin America to finance the debt and pay dividends, reducing a global company to an Italian company with large mobile phone operations in Brazil and a broadband unit in Germany.

The job cuts show he needs to change Telecom Italia to face stiffening competition in Italy as broadband companies such as Fastweb, taken over by Swisscom last year, win a greater share of business.

While Telecom Italia failed to stem its decline, other large European former monopolies such as France Telecom and Deutsche Telekom have been able to hold the line or increase sales even in mature markets in western Europe.

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Swisscom, the incumbent operator in Switzerland, released its full year results today. Revenues were up 14.9% year-on-year to €7,020 million (CHF 11,089 million) and EBITDA increased 18.9% to €2,850 million (CHF 4,501 million). Net income increased 29.4% to €1,309 million (CHF 2,068 million).

Comment: Swisscom has had a busy year, with the acquisition of Fastweb (Italian altnet) and the repurchase of a stake in its mobile unit - Swisscom Mobile. With these acquisitions having taken place during 2007, it is not surprising to see revenues increase year-on-year. What is more surprising is that Swisscom has managed to stay focused during this time and implement organisational changes at the company, which have led to improved profitability.

This in itself is some achievement, but Swisscom has managed something even more remarkable for a Western European incumbent and that is to generate positive customer growth across its fixed business. Swisscom has gained more broadband customers than it has lost fixed voice customers, recording 3.4% year-on-year growth in customer lines. Unfortunately, this was still not enough to stem the decline in fixed revenues, which fell 4.5% to €2,832m (CHF 4,474m), proving what a difficult task incumbent operators face in trying to keep their fixed business growth positive.

In other areas of the business, mobile revenues increased by 1% to €2,542 million  (CHF 4,015 million), and Solutions (Swisscom’s ICT business unit) revenues remained flat at €775 million (CHF 1,224 million). What is interesting with the Solutions unit is that despite the lack of revenue growth, EBITDA improved by 60% from €44 million to €71 million due to cost savings and an improved focus on higher-margin products and services. Like BT, Swisscom has placed high emphasis on ICT and is investing heavily in updating its network and providing better services for customers.

As for its outlook for 2008, Swisscom expects to see revenue growth of around 11% to €7.8 billion (CHF 12.3 billion) and EBITDA growth of around 6.5% to €3 billion (CHF 4.8 billion), which seems realistic allowing for the impact of Fastweb for a full year. In terms of strategy, Swisscom is focusing on improving customer service by opening more shops, developing its Bluewin TV proposition and scaling back in areas such as directory enquiries where demand is declining. All this seems sensible in an industry where price is becoming less of a differentiator and quality of service is key.

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European carrier Colt Telecom reported fourth-quarter sales of EUR 424.6 million, down 5.5 percent from a year earlier due to cuts in fixed-mobile rates and lower voice revenues. Data revenues rose 10 percent to EUR 220.9 million, while voice revenues fell 18 percent to EUR 203.7 million. EBITDA edged 1.3 percent higher to EUR 71.8 million, and pretax profit grew to EUR 13.5 million from EUR 8.9 million a year earlier. Under its new organisational structure, Colt reported sales from large enterprises up at EUR 174.4 million, while sales from SMEs and wholesale fell versus a year earlier, to EUR 119.3 million and EUR 130.9 million respectively. Wholesale generated the most operating profit, at EUR 10.5 million, while the SME business was loss-making at EUR 1.2 million. After its first full year of profitability in 2007, Colt said it expects “another year of progress” in 2008.

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Dialog Group saw consolidated revenues grow 27 percent to LKR 32.52 billion in the year ended 31 December 2007, versus LKR 25.68 billion in 2006. EBITDA was flat at LKR 13.74 billion and profit after tax fell 11 percent to LKR 8.97 billion from LKR 10.12 billion in the year before. Mobile unit Dialog Telekom contributed well to the Group’s performance while Dialog Broadband Networks and Dialog Television are still building up their networks and services.

Mobile unit Dialog Telekom saw its subscriber base grow 37 percent year-on-year to reach 4.27 million. Revenues went up 24 percent to LKR 31.13 billion, from LKR 25.15 billion, and EBITDA rose 7 percent to LKR 14.33 billion. Dialog Telekom’s profits went up 1 percent to LKR 10.13 billion.

Dialog Broadband Networks has launched CDMA WLL fixed line, and WiMAX broadband access during 2007. The unit saw revenues go up 36 percent to LKR 1.05 billion but the unit posted a net loss of LKR 317.96 million.

Dialog Television (including subsidiaries Communiq Broadband Network and CBN Sat) posted revenues of LKR 722.45 million during 2007, its first year of post-acquisition operations. The unit posted a net loss of LKR 788.53 million.

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Magyar Telekom revenues grew 0.8 percent last year to HUF 676.7 billion. EBITDA for 2007 fell 5.7 percent to HUF 243.9 billion, with an EBITDA margin of 36 percent. EBITDA excluding investigation-related costs (HUF 5.7 billion) as well as severance payments and accruals was HUF 277.1 billion, with a margin of 40.9 percent.
Net income fell by 20.3 percent, from HUF 75.5 billion to HUF 60.2 billion, hit by costs for the headcount reduction programme, higher financial expenses and the introduction of the solidarity tax as of September 2006. Net cash generated from operating activities grew from HUF 190.3 billion to HUF 231.3 billion, mainly due to the lower working capital requirements and reduced tax payment thanks to the utilisation of tax benefits. For 2008, Magyar Telekom targets stable revenues and a slight decline in underlying EBITDA compared to 2007. The main factors impacting EBITDA are the increased competition in the mobile market, the difficult Hungarian macroeconomic environment and regulatory decisions. The operator targets a capex to sales ratio of around 15 percent.

At the Hungarian fixed-line activities, fourth-quarter revenues fell 2.7 percent to HUF 61.5 billion, while EBITDA fell 48 percent to HUF 12.0 billion due to the staff reduction costs. The adjusted EBIDTA margin was at 38.8 percent. The decline was due to falling voice revenues and increased competition primarily from mobile and cable operators, leading to a reduction in traffic and average tariff levels. Internet revenues were up 11.5 percent to HUF 13.5 billion as the number of broadband connections rose to 717,000 at end-2007. The total number of fixed lines fell 6.0 percent from end-2006.

T-Mobile Hungary showed a revenue decline of 0.5 percent to HUF 73.2 billion in the fourth quarter, as the growth in the customer base and expansion of value-added service revenues were offset by a decline in equipment sales and wholesale voice revenues. ARPU showed a 5.4 percent decrease due to the declining tariff levels and the cut in mobile termination rates in February 2007. Average acquisition cost per new customer increased by 5.1 percent, reflecting the higher subsidies for postpaid customers and 3G/HSDPA enabled devices. EBITDA was HUF 29.3 billion, giving a margin fo 40.0 percent.

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Emerging markets mobile operator Millicom reported fourth-quarter revenues of USD 768 million, up 41 percent from a year earlier on strong subscriber growth. EBITDA improved 34 percent to USD 307 million, and net profit rose to USD 113 million from USD 50 million a year earlier, helped by a tax benefit in Colombia. Millicom added 3.4 million new subscribers in the quarter for a total 23.35 million at year-end, of which 96 percent were prepaid. The company said the strong subscriber growth led it to accelerate investments last year, which rose to over USD 1 billion from USD 616 million in 2006. It expects to again spend over USD 1 billion this year. MIllicom will pay a special dividend of USD 2.40 per share with the proceeds from selling Paktel.

Central America remained the company’s largest market with revenues of USD 329 million, up 31 percent from a year earlier. EBITDA improved 28 percent to USD 168 million. The region added 1.42 million customers during the quarter for a total 8.82 million, helped by the introduction of per-second billing last year.

In South America, revenues rose 47 percent from a year earlier to USD 239 million, while EBITDA improved 54 percent to USD 75 million. Subscriber numbers rose to 5.89 million from 5.30 million at the end of September. Millicom said results in Colombia were hurt by the cut in interconnection rates, but a parallel cut in end-user prices is expected to offset the effect. Tigo Colombia added 276,000 subscribers in the quarter.

In Africa, sales rose 57 percent to USD 145 million and EBITDA increased 34 percent to USD 44 million. Over 1 million new customers were added in the quarter, for a total 5.67 million. Milicom said its operations in Chad, which were shut down at the end of January, are preparing to restart services shortly. Growing in the business in Chad and DRC led to a drop in the EBITDA margin to 31 percent last year, which Millicom said should be a low point and wa salready improving from Q4.

In Asia, revenues from continuing operations were up 43 percent to USD 54.5 million, and EBITDA rose 27 percent to USD 20.4 million. The number of subscribers increased to 2.96 million from 2.62 million three months earlier.

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Telecom New Zealand reported net earnings of NZD 172 million for the second quarter ended 31 December 2007, down 25 percent from NZD 229 million in the year-ago quarter. Revenues went up 2.1 percent to NZD 1.42 billion, versus NZD 1.39 billion while EBITDA rose 4.4 percent to NZD 453 million. Tax expenses in the quarter were higher and earnings before tax totalled NZD 231 million, versus NZD 211 in Q2 a year earlier. The 2006 December quarter also included NZD 24 million in net earnings from discontinued operations: the Yellow Pages Group which was sold last year.

Mobile revenue decreased in the quarter by 4.7 percent year-on-year to NZD 201 mail, primarily due to declines in device sales, voice usage and pricing, partially offset by an increase in mobile data revenue. Mobile data revenue was stable at NZD 57 million. Blended ARPU in the quarter was NZD 3 7.9, down 16.5 percent year-on-year. Telecom ended 2007 with 2.12 million mobile connections, up 13 percent year-on-year. Of the total customer base, 39.4 percent were postpaid subscribers, while 60.6 percent were prepaid connections.

Broadband and internet revenue increased by 3.6 percent to NZD 86 million, and the number of connections went up 29 percent year-on-year to 674,000. The effect of this growth on revenue is still negated by the reduction in pricing for business customers that occurred in the quarter. Telecom expects that the introduction of new regulated broadband services such as naked DSL and LLU will accelerate the rate of broadband penetration, and may result in further downward pressure on wholesale and retail broadband prices. Wholesale revenues should continue to grow strongly given the introduction of these new regulated services and the overall growth expected in the broadband market. Wholesale local service revenues and wholesale broadband revenues went up 52.6 percent and 36.4 percent respectively.

For the year ending 30 June 2008, Telecom expects EBITDA from New Zealand operations to decline 5 to 8 percent, with Q3 likely to be weaker than Q4. EBITDA from Australian operations is forecasted to total AUD 80 million to AUD 90 million. Group consolidated net earnings are expected to come in at NZD 700 million to 730 million, including an additional NZD 10 million of after-tax dividends from Southern Cross Cables Group.

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Latin American mobile operator America Movil added 10 million new subscribers in the fourth quarter, for a total 153.4 million mobile customers at the end of the year. Net additions for the full year were 28.6 million, some 6 million more than projected atthe start of the year. The strongest growth came in its home market Mexico, followed by Brazil, Argentina and Colombia. Sales for the quarter rose to MNP 85.2 billion from MNP 67.7 billion a year earlier, as an around 15 percent increase in average minutes of use helped offset price declines in most markets. EBITDA improved 28.3 percent to MNP 32.85 billion, with the margin growing to 38.5 percent from 37.8 in 2006. Net profit jumped 49.4 percent to MNP 15.86 billion, helped by a lower tax bill. Capex was MNP 34.6 billion for the year, while the company finished the period with net debt of MNP 92.7 billion. America Movil said it has started the roll-out of UMTS in major markets, and expects to cover all the major Latin American cities by the end of this year.

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BT reported sales for the fiscal third quarter to 31 December of GBP 5.154 billion, up 1 percent from a year earlier. EBITDA, excluding one-time items, rose 3 percent to GBP 1.449 billion, while pretax profit fell 30 percent to GBP 447 million, hurt by one-time charges and higher interest costs. At its home business BT Retail, sales rose 2 percent to GBP 2.146 billion and adjusted EBITDA improved 12 percent to GBP 402 million. While consumer sales fell 1 percent, BT continued to grow in the broadband market, adding 177,000 customers in the quarter for a total 4.3 million. Its Wi-Fi service Openzone also racked up nearly 1 million minutes per day, while users of the IPTV service BT Vision more than doubled in the quarter to 120,000 and have since reached 150,000. BT said it continues to expect growth in group sales and adjusted EBITDA and EPS for the full fiscal year.

BT Global Services revenue grew 6 percent to GBP 1.965 billion and EBITDA before leaver costs was up 23 percent to GBP 215 million. The strong EBITDA growth was driven by higher margins on maturing contracts and continued cost reductions, BT said. Total orders in the quarter amounted to GBP 1.9 billion, bringing the value of orders achieved over the last twelve months to GBP 8.6 billion.

At BT Wholesale, sales fell 11 percent to GBP 1.205 billion due mainly to lower external revenues. Adjusted EBITDA dropped 9 percent to GBP 344 million. BT said it is testing its new Wholesale Broadband Connect product, which offers speeds of up to 24 Mbps, with ten operators and expects a commercial launch in the spring. The 21st Century Network project will see the launch of four strategic products this year, while BT works on getting customers to voluntarily switch to the new IP network. A open Innovation Platform that will enable BT, other operators and third-party developers to create software applications based on BT’s 21CN capabilities will launch this summer. The operator also hinted that a new converged fixed-mobile consumer product will launch by year-end, replacing the currnet product BT Fusion.

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Dutch operator KPN has outlined plans to cut thousands of more jobs as part of its new ‘Back to growth’ strategy for the period 2008-2010. The company will cut another 2,000 FTE positions on top of the 8,000 already announced in 2005, while another 1,300 external FTEs will also go over the coming three-year period. The move is expected to result in EUR 240 million in annual cost savings, which the company will reinvest in growing new services such as broadband, TV and business IP services. KPN said it will pursue a “radical simplification” of its business, from front-end retail to back-end network operations, in order to reduce costs. This is expected to lead in the Netherlands business to a return to EBITDA growth after 2008 and revenue growth by 2010.

The company targets increasing EBITDA to over EUR 5.5 billion and sales to over EUR 15 billion in 2010, versus a reported EUR 4.9 billion and EUR 12.6 billion for 2007. That includes contributions from recent takeovers iBasis and Getronics, as well as expected high single-digit revenue and EBITDA growth at the mobile activities outside the Netherlands. For shareholders, KPN also announced plans for a EUR 1 billion share buyback this year and its intention to increase dividends over the medium term to 40-50 percent of free cahs flow, from 35-40 percent currently. Capital expenditure meanwhile will rise to around EUR 2 billion by 2010, from EUR 1.7 billion last year, while free cash flow is expected to exceed EUR 2.4 billion per year.

The new strategy was presented alongside fourth-quarter results showing sales up 20.4 percent from a year earlier to EUR 3.659 billion, thanks to the takeovers. EBITDA increased 5.6 percent to EUR 1.216 billion, while net profit jumped to EUR 1.581 billion from EUR 426 million, thanks to a EUR 1.2 billion tax gain at E-Plus in Germany. The full-year revenue decline of 0.8 percent was roughly in line with the company’s guidance for flat sales, while EBITDA dropped 0.6 percent versus an outlook for a flat result.

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