to download Telecom Italia Annual Report 2011 - Company Reporting

In detail:
(millions of euros) 2011 2010 Change
Historical EBIT (87) (92) 5
Non-organic (income) expenses 36 46 (10)
Non-organic expenses already described under EBITDA (21) - (21)
Goodwill impairment charge 57 46 11
Comparable EBIT (51) (46) (5)
The goodwill impairment loss of 57 million euros (46 million euros in 2010) was recognized following the
results of the impairment test.
Capital expenditures
Capital expenditures total 61 million euros (67 million euros in 2010). Such expenditures refer to
TI Media – La7 (31 million euros), the MTV group (4 million euros) and the network operator
(26 million euros). They mostly refer to the acquisition of television rights extending beyond one year
(29 million euros) and purchases of infrastructures for the development and maintenance of the digital
terrestrial network for 26 million euros principally in connection with Telecom Italia Media
Broadcasting’s digitalized operations in regions where analog television has been switched off.
Headcount
Headcount is 765 at December 31, 2011 (including 37 with temp work contracts), with a decrease of
12 compared to December 31, 2010 (777, including 44 with temp work contracts). Without considering
the reduction in the temp work headcount (7 persons), the reduction of 5 people is due to the change
both in the number of persons with fixed-term contracts -10 (TI Media – La7 +1, MTV Group -11) and
permanent contracts, 5 in total (TI Media – La7 +15, network operator -1. MTV Group -9). In particular,
the addition of 15 persons with permanent contracts at TI Media – La7 is for the most part to settle
some work relationships and bring External Relations inside the company.
Other information
Early termination of the Competence Center contract with Telecom Italia
On September 29, 2011, the Telecom Italia Media board of directors’ meeting passed a resolution to go
forward with the early termination of the Competence Center contract with Telecom Italia.
The Contract was originally signed in 2007 for a three-year period and subsequently renewed at least
until December 31, 2012. The purpose of the contract was the supply of editorial services by
Telecom Italia Media to Telecom Italia covering the creation, design of programs, research and purchase
of media content for the relative use on Telecom Italia’s various TV platforms (IPTV, Cubovision, WEB,
etc.). Telecom Italia Media received a minimum guaranteed payment, established on the basis of a
forecast of strong customer expansion of the IPTV and OTTV platforms, as well as a variable price as
Telecom Italia’s relative sales increased.
The above growth forecasts were not met owing to a reduced market, in addition to modifications of the
effective application of the regulatory framework of reference, accompanied by a strong push to reduce
prices by the two main players of the pay TV platforms in Italy.
In view of the above, Telecom Italia decided on the in-house management of the editorial activities
relating to the platforms which it manages. For these reasons, Telecom Italia made a proposal to
Telecom Italia Media to early terminate the Contract, as from October 1, 2011, paying
Telecom Italia Media compensation of 21 million euros. A fairness opinion on the compensation was
issued by an independent external valuation expert, identified by common agreement of the parties.
Report on Operations The Business Units of the Telecom Italia Group – Media 72