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Sales and service revenues, totaling euro 17,571
show an increase of 2.1% (+euro 355 million) compared to the prior year,
thus confirming the already positive economic performance of 2003.
On
a comparable consolidation basis, underlying growth was euro 303 million,
+1.8%.
This positive performance was achieved thanks to the success of
efforts to develop the Broadband market and innovative services, particularly
Web services.
Furthermore, the core telephone
market continued to be successful, and the range of wholesale services was enhanced.
The
contribution to revenues by the individual Strategic Areas of Business
is as follows:
Retail Telephone
Retail telephone revenues, equal to euro 10,267 million, show a limited reduction
(– euro 67
million, – 0.6%) compared to the prior year. The policy of building customer
loyalty continues to be the primary aim of marketing strategy. This takes the
form of adding attractive features to the
flat rate plans and the new Tutto 4* and Chat SMS packages,
which, at December 31, 2004, had reached 7,813,300 customers (of which flat-rate
plans
total 5,883,300).
This was possible thanks
partly to the evolution of Innovative Phones, that is, the Aladino line of cordless
phones equipped with an ever-broader range of options to support innovative services,
and videophones. At the
end of 2004 the Innovative Phone portfolio arrived at 1,555,000 units.
Retail Internet and Data Business
Revenues from the Internet and the Data Business areas, equal to euro 2,526
million, showed overall growth of approximately 12.5% compared to the prior
year(+euro 280 million, of which
+euro 251 million referred to Internet Consumers and +euro 29 million to Data
Business services). This growth was generated, in particular, by the ADSL
Alice and ADSL Smart packages
(+euro 307 million, +108%) and by innovative data transmission services (+euro
104 million, +20%). Conversely, there was a decrease in revenues from traditional
data transmission services
(including leased lines and data products) and Internet dial-up traffic (respectively, – euro
75
million and – euro 56 million).
At the end of 2004, the overall Telecom Italia
Wireline’sBroadband portfolio had reached a total of
4,430,000 access lines, an increase of +2,230,000 lines compared to December
31, 2003.
On the domestic market, the number of access lines stood at 4,010,000,
an increase of 1,970,000
over December 31, 2003.
On the European market, the number of Broadband access
lines totaled 420,000, a growth of 260,000 compared to December 31, 2003. The
increase was sustained
by the growth of European
projects (in France with Telecom Italia France, and in Germany with HanseNet)
and by the increment in the clientele of BBNed in Holland.
During 2005, the range
of Broadband services, relating to the European projects in France and Germany,
will be further enhanced by the launch of new VAS services
and innovative phones.
Retail VAS (Value Added Services)
Revenues from VAS services, equal to euro 1,070 million, showed a decrease of euro 60 million
(– 5.3%) compared to 2003 following the contraction of premium services (– euro 209 million,
– 43.3%). This was partly compensated by the growth of innovative services (+euro 149 million,
+23%) achievedthanks especially to the trend of Web services (+euro 102 million, +51.8%).
Wholesale
Revenues from Wholesale services, equal to euro 3,329 million, increased
by a total of a euro 61 million (+1.9%), compared to 2003. The growth of
revenues from national wholesale services
amounted to euro 6 million – with particular emphasis on revenues from Data services
(+euro 85
million, +60.7%) – andthat of international wholesale operations was euro 55
million (+4.3%).
Gross operating profit, equal to euro 8,426 million, registered
an increase of euro 171 million (+2.1%) compared to 2003. As a percentage of
revenues, gross operating profit was 48%
(47.9% in 2003).
On a comparable consolidation basis, underlying growth was 2.0%.
The improvement
in gross operating profit in 2004 can be attributed not only to the trend of
revenues but also to careful management geared to achieving ever-higher
levels of efficiency,
with a significant improvement in personnel costs and in terms of costs not directly
related to business development.
Operating income was euro 5,199 million, and presented
an increase of 4.6% (+euro 230 million) compared to 2003. This was the result
of not only the factors already
mentioned with regard to
gross operating profit, but also lower amortization and depreciation and valuation
adjustments.
Operating income represented 29.6% of sales (28.9% at the end of
2003).
On a comparable consolidation basis, underlying growth was equal to 5.1%.
Industrial
investments amounted to euro 2,201 million and presented a decrease
of euro 101
million (– 4.4%), albeit fully respecting the development policies for innovative
infrastructures (with particular reference to Broadband activities in the domestic
and international spheres),
thanks to processes designed to optimize expenditures.
The number of employees decreased
by 383 compared to December 31, 2003.
The change is due to the hiring of 1,917
persons, including 882 in Telecontact
Center (referring to persons taken on under continuous coordinated collaboration
contracts, previously employed by
Atesia), and about 500 persons by Telecom Italia Wireline (relating to the strengthening
of the network operating structure and the improvement in the professional mix)
and an increase in the
number of employees at the company Telecom Italia France and 2,384 persons who
left the company (mainly in Telecom Italia Wireline). There were also organizational
changes – mainly
regarding the activities performed by the company’s telephone exchanges – which
brought 226
persons from Telecom Italia’s Corporate Central Function to Wireline. In addition,
there were intragroup transfers (+9), the consolidation of Telefonia Mobile Sammarinese
(+6), the sale of
the Loquendo business segment to Citec S.p.A. (– 58) and the sale of Atesia to
Communication
Services S.p.A (– 99).
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EVENTS SUBSEQUENT TO DECEMBER 31, 2004 |
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The following events took place: |
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on January 19, 2005 the National Regulatory Agency approved the new Telecom Italia rate
charges which only affect local calls. The new charges, with effect from January 23, 2005, have
increased the price of the answering charge for local calls but have reduced the price per
minute of the duration of local calls; |
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on January 26, 2005 Telecom Italia signed a protocol agreement with the Consumer
Associations which establishes new modes of operation for handling complaints about traffic
generated by numbers beginning with 709. In fact, Telecom Italia, has decided to proceed with
canceling the amounts owed for 709 traffic prior to September 1, 2003 in the case of
residential customers who lodged a regular complaint according to the rules established by the
conditions in the phone contract and have reported to or filed a lawsuit against the competent
authorities; |
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on February 1, 2005 Telecom Italia doubled the speed
of broadband connections to 640 Kb/s both for residential customers
with ADSL flat-rate plans and business customers.
As a result, these
customers received a connection upgrade to 1.2 Megabit/s for receiving
and to 256 Kb/s for transmitting, without having to request an upgrade or pay
any extra
charge. |
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INFORMATION ON OPERATIONS |
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The main operating highlights at December 31, 2004 compared to December 31, 2003 are
reported below, in addition to the principal commercial activities carried out during 2004. |
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Retail |
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A brief description follows of the main packages and commercial initiatives in 2004, under the
framework of the strategies presiding over the Retail Phone market (Access and Traffic in
particular) and the developments keyed tothe Internet markets (Adsl Alice and Adsl Smart plans),
Data business (Broadband and other Data services) and VAS. |
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National Wholesale |
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In 2004, the growth of the national Wholesale market reflected
the trends which had emerged the prior year, with a contraction of interconnection
telephone traffic by other operators of 6%.
This situation was countered
by growth, particularly by Mobile OLO operators, of traffic
terminated on the Telecom Italia network (+3% compared to 2003).
With regard to
lines supplied to other operators, broadband access lines continued to
grow. This was partly encouraged by the launch of Shared Access lines,
along with the by now consolidated
XDSL and LLU models. Details of the most significant quantitative changes are
as follows: |
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International Wholesale |
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In Europe, Telecom Italia Sparkle maintained its leadership
position in the Voice market and continued to play an important role in
the IP & Data transmission segment.
The Voice business showed a steady
growth in volumes, equal to approximately 14%, compared to 2003 (excluding
traffic from Telecom Italia Wireline customers). A decisive contribution
to this increase was generated by transit traffic which increased by approximately
24%, thanks to
the competitiveness of the offering on the international market. This performance
also proved possible thanks to the policy of acquiring new customers (57
new interconnections, of which 29
in Voice Over IP - VOIP), a continuous effort to achieve cost efficiencies, based
on the development of VOIP carrier technologies (863 million minutes compared
to 145 million minutes
in 2003), and strategic hubbing policies with customers and suppliers in Africa
and the Middle East. With regard to VOIP, synergies set up with Intelcom
San Marino, by using their platforms,
resulted in approximately 276 million minutes being delivered, proving to be
the “best cost”
on some routes.
With regard to the IP & Data Transmission market, during 2004,
the downward trend of prices was accompanied by a substantial growth of the band
sold in the wholesale
market,
a phenomenon which contributed to an increase in revenues from innovative services
of
approximately 40% compared to 2003. |
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Domestic network |
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The domestic network in statistics at December 31, 2004
was as follows. |
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As far as the domestic network is concerned, the following
took place in 2004: |
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Foreign Retail Networks |
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By launching the “International Broadband” project,
Telecom Italia created access and innovative Broadband service packages
in the
key European cities by exploiting its know-how and
technological assets.
The project, conceived in 2003, currently involves France
and Germany through the subsidiaries
Telecom Italia France and HanseNet. |
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International Network |
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Telecom Italia Sparkle operates international wholesale
Voice, Data transmission and IP services and retail Global Corporate Network
services for Multinational Customers using an international
network consisting of corporate-owned cross-border backbones and bilateral connections.
As
far as voice telephone services are concerned, during 2004, the switching
capacity of international gateways was increased and new services were
introduced to accommodate the
range of innovative services and new modes of interconnection (Mobile Number
Portability, ISUP v2, ITU-ANSI conversion). The ToIP platform was also
adapted to support services which are establishing themselves as market
standards (T.38 Fax Relay, DTMF Out of Band, H.323, SIP,
SIP-T) and the billing platform was completely renovated to support the evolution
of the business model. In addition, a new PoP was established in Singapore
for the collection and direct
termination of voice traffic from/to the Asia-Pacific area.
The FreeMoveproject
was completed, thus extending interconnection to other European operators with
a total coverage of 14 countries, the aim being to support
the alliance between European
mobile operators, known as TTTO.
With reference to IP & Data Transmission services,
work continued to develop the IP backbone by increasing the transmissive capacity
of the European backbone
and the trans-Atlantic band.
Furthermore, in the U.S.A., in the NAPs – Network
Access Points – of Newark (NJ),
Miami, Palo Alto and Ashburn, approx. 6 Gbit/s of new peerings (IP traffic exchange)
were activated.
New PoP (Point of Presence) were created in Hamburg (Germany)
for synergies with
HanseNet,
and in Cairo (Egypt), to support the development of IP & Data Transmission business
in the
Mediterranean area.
In South America the ‘Golden Ring’ project was completed,
in collaboration withLAN, with the creation of IP PoPs in Santiago, Buenos Aires,
Lima and San Paolo.
With regard to Global Corporate Network retail services to
Multinational Customers,the network was extended for the offering of IP-MPLS
and Frame Relay services in
South America (Santiago,
Buenos Aires, San Paolo) and in the U.S.A. (Miami), whereas, in Europe, a new
PoP MNCs was created in Athens.
Solutions for XDSL access services were also developed.
With regard to development
of the transmission network, Telecom Italia Sparkle is participating in a consortium
to create the new Sea-Me-We 4 submarine cable
system which will connect the area
of the Mediterranean to the Middle and Far East through 15 landing points including
Marseilles, Palermo, Alexandria, Mumbai and Singapore, covering a distance of
approximately 20,000 km and
with a potential capacity of 1,300 Gbit/s. The system is scheduled to become
operational in the
second half of 2005. |
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MAJOR SUBSIDIARIES |
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Path. Net S.p.A.
Held by: Telecom Italia 100%
The company is responsible for the development and management of the
Single Public Administration (R.U.P.A.) network.
The table shows the key
economic highlights:
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Activities during the year:
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Renewal of the RUPA Framework Contract until December
31, 2006 |
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Expansion of the very high profile broadband services
plan at a flat rate. |
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Loquendo S.p.A.
Held by: Telecom Italia 99.98%
The company is involved in the research, development and marketing of technologies,
equipment and services for voice synthesis, voice recognition and/or voice
interaction.
The table shows the key economic highlights: |
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Activities during the year:
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Expansion of foreign activities (with Spain, Germany, France, Greece, U.S.A., Canada, South
America) and the non-captive market. |
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Sale of the “Application” business segment (with effect from July 1, 2004) to Citec S.p.A.
(a company specializing in the creation and development of integrated voice and data
transmission systems). At the same time, an agreement was signed giving Citec the role of
Master Distributor for Loquendo technologies on the Italian market. |
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Further development of in-house technologies: so far, 16 languages have been developed,
while, at the same time, the company has continued to implement different types of male and
female voices (36 at year-end). |
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Telecontact Center S.p.A.
Held by: Telecom Italia 100%
The company conducts contact center activities and deals with the residential
and business
clientele of Telecom Italia S.p.A. who contact the “187” and “191” services.
The
table shows the key economic highlights:
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Activities during the year:
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Within the framework of the reorganization of the Telecom Italia Group’s Customer Care
activities, the company acquired the following: |
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on February 4, 2004, as the result of a partial and proportional spin-offfrom Atesia S.p.A.,
two new sites at Catanzaro and Caltanissetta, now centers of operations for the “187”
and “191” services; |
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on July 1, 2004, as a result of the sale for consideration by Atesia S.p.A.,a new site in Rome,
now a center of operations for the “187” service. |
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Operation of the “191” service continued
at the Naples offices. |
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BBNed Group
Held by: Telecom Italia International 98.78%
The group operates in the Dutch market providing local broadband access
for ISP and business
customers.
The table shows the key economic highlights:
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Activities during the year:
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Completion of development activities of the network
and the OSS platform; |
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Connection of 329 co-locations to the network of the
national operator KPN; |
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Marked growth in numbers of customers acquired: 172 thousand by the end of 2004, an
increase of 146% compared to the prior year; |
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Enhancement of the services portfolio with the launch of Voice over DSL, geared to the SME
clientele segment. |
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Latin American Nautilus Group
Held by: Telecom Italia 100%
The group ensures the transport of traffic and the supply of transmission
capacity for wholesale customers in Latin America.
The table shows the key
economic highlights:
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Activities during the year:
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Extension of the customer base in the areas under its control and, in particular, consolidation of
its presence in Venezuela |
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Development and consolidation of the range of IP services in Latin America in synergy with
TI Sparkle |
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Launch of a plan to reduce operating costs (mainly general and administrative and network
costs through renegotiation of contracts with the company’smain suppliers). |
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Mediterranean Nautilus Group
Held by: Telecom Italia 62.51%, Telecom Italia International
7.49%
The group ensures the transport of traffic and the supply of transmission
capacity to wholesale customers in the Eastern Mediterranean. The group
includes the following companies:
Mediterranean Nautilus S.A., Elettra Tlc S.p.A. and the Mediterranean Nautilus
Ltd. group.
The table shows the key economic highlights:
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Activities during the year:
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On the commercial front, positioning on the Israeli market was consolidated with the
finalization of some important contracts |
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Continuation of the debt restructuring phase by rescheduling repayments falling due,
whereas, on the internal front, the company made particular efforts to reduce
operating costs |
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Renewal of the MECMA (Mediterranean Cable Maintenance Agreement) contract and extension
of cable-laying and survey operations to the power and oil and gas sectors. |
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Med-1 Group
Held by: Telecom Italia 23.17%, Telecom Italia International
27.83%
The group ensures the operation of the LEV-1 cable (Italy - Cyprus - Israel)
and the IC1 domestic
Israeli network.
The table shows the key economic highlights:
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Activities during the year:
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Supply of maintenance services to the LEV-1 cable customers, operation of the Israeli IC1
domestic network and supply of carrier and connectivity services. |
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HanseNet Telekommunikation GmbH
Held by: Telecom Italia 100% throughTelecom Italia Deutschland
Holding GmbH
The company operates in the market of Broadband telecommunications
(access developed mainly using local loop unbundling and VAS services) in the
Hamburg area.
The table shows the key economic highlights:
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Activities during the year:
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Continuation of the development of plans and packages for the residential and business
clientele in the Hamburg area |
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by December 31, 2004, customers numbered 240 thousand (compared to 105 thousand at the
end of the prior year). |
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Telecom Italia Sparkle Group
Held by: Telecom Italia 100%
The Group operates in the market for Voice, Data Transmission and Internet
Protocol services.
The table shows the key economic highlights:
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Activities during the year:
The Group continued to develop
the International Wholesale business, where it is ranked one of the
best in its class in the world. The trend in results was affected by
the start-up of Telecom
Italia France launched at the end of 2003.
In particular, activities during 2004
included:
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Creation of new interconnectionswith carriers to augment business opportunities with a
particular focus on the VoIP service; |
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With reference to IP services, backbone development activities continued by increasing
European transmission capacity and the trans-Atlantic band; in the U.S.A. approximately 6
Gbit/s of new peerings were created for theNAPs of Newark (NJ), Palo Alto, Miami and
Ashburn: |
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Improvement in the efficiency of traffic delivery
with continuous efforts to optimize costs; |
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The creation of new PoPs in Hamburg for synergies with Hansenet, and inCairo to support the
development of IP and Data transmission business in the Mediterranean area. In South
America, the “Golden Ring” project was completed, in collaboration with LAN, with the creation
of IP PoPs in Santiago, Buenos Aires, Lima and San Paolo. |
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