Analyst Note| Javier Correonero |
Narrow-moat Telecom Italia closed the second quarter of the year with revenue of EUR 3.82 billion and EBITDA of EUR 1.64 billion, up 1% and down 5.8%, respectively, year over year. Service revenue in Italy declined 1.7%, mainly driven by weakness on the mobile business, where revenue declined 7.1% year over year compared with an 11.3% decline one quarter ago, with 103,000 mobile customer losses compared with 74,000 in the first quarter. We therefore expect Iliad, which is disrupting the lower end of the Italian market, to be the main beneficiary and to have kept winning market share as Vodafone Italia also recently reported a loss of 63,000 customers during the second quarter with revenue going down 9.3% organically. Notwithstanding, mobile average-revenue-per-user (ARPU) for Telecom Italia grew from EUR 11.4 to EUR 11.7, we believe supported by higher-end consumers. We are maintaining our EUR 0.62 fair value estimate.