Omnitel Pronto Italia Confirms Its Success by Doubling Revenues and Posting a Net Income of Lit. 234 Billion in First Six Months of 1998
Company Reaches Cash-Flow Breakeven Point a Year Ahead
July 21, 1998
Carlo Fornaro - 02-4143.3537 or 0348-3402811
Milan -- Bell Atlantic's key Italian investment Omnitel Pronto
Italia, Italy's first private GSM operator, closed the first six months of 1998 with
results that confirm its rapid growth. Revenues have reached Lit. 1,746 billion*, a
growth of 157% as compared to the Lit. 680 billion posted in the first six months of
1997, and close to the Lit. 1,835 billion posted for the entire fiscal year 1997.
Revenues from the sale of services trebled to Lit. 1,495 billion, up from the Lit.
536 billion posted for the first six months of 1997.
EBITDA was Lit. 526 billion, or 35.2% of revenues, as compared to Lit. 23 billion
for the first six months of 1997.
Net result for the six months was Lit. 234 billion as compared to the net loss of Lit.
172 billion posted in the same period of 1997.
The company's positive financial performance has enabled it to reach cash-flow
break-even a year ahead of schedule: net cash flow (after investments and changes
in net working capital) was positive for Lit. 85 billion as compared to a shortfall of
Lit. 273 billion posted for the first six months of 1997.
Key to Omnitel's financial results has been the continued growth in the customer
base which on July 10th reached 4 million, making Omnitel the fourth largest GSM
cellular operator in Europe. With a 1.6 million increase in the number of
subscribers in the first 6 months of the year, the company has captured a 40%
share of the Italian cellular market: 1 customer in 4 in Italy is now an Omnitel
The growth in the number of customers is certainly due to the success of
rechargeable cards, which in the first 6 months of the year accounted for 90% of all
new customer activations. Omnitel re-chargeable cards with cash-display and self-
service re-charge 24 hours a day, can be easily recharged thanks to the capillary
distribution network the company has established: re-charges can be purchased at
Omnitel stores, tobacconists, newspapers stands, motorway service areas and other
points of sale including over 5,000 ATMs.
The business segment also grew substantially. Whereas the overall customer base
grew by 59% since the beginning of the year, business and corporate customers
grew by 101% thanks to the introduction of tariff plans like RAM (Rete Aziendale
Mobile) and CAM (City Aziendale Mobile).
Customer growth has been achieved while keeping acquisition costs under tight
control at under Lit. 60,000 per new customer. This is the lowest acquisition cost
in Europe and has helped the company maintain a very low churn rate.
The increase in the number of customers has led to an increase in personnel, now at
4,390 units, mostly employed in the company's customer care operations. Omnitel
plans to add to the 5 fully operational "Customer Service Centers" spread across
Italy, two additional centres in Pisa and Catania which will employ 600 people.
78% of Omnitel employees have a high school diploma while the remaining 22%
hold a university degree, 46% are men and 54% are women.
Over the past 6 months Omnitel has maintained a high level of investments with
Lit. 457 billion (+78% as compared to the same period in 1998) invested in both
GSM network infrastructure - bringing the total number of radiobase stations to
2,880 - and in customer support infrastructure.
Quality of service has been confirmed by the prestigious awards received from
Teleperformance for Best Customer Service in Italy and from Arthur Andersen for
Commenting on Omnitel's first six months results, Pietro Guindani, CFO, Omnitel
Pronto Italia, stated "Besides the significant growth pattern, I think it is important
to emphasize two aspects: the company's financial strength - having reached the
financial breakeven point - and the company's profitability given that, over a period
of only two and half years, Omnitel has reached an EBITDA ratio of 35.2%. These
are significant results that place Omnitel among the most solid and profitable
companies in Italy".
In billions of Lit. 1st. semester '98 1st. semester '97 %change Revenues 1,746 680 +157% - from sale of services 1,495 536 +179% - other revenues 251 144 EBITDA 526 23 N.A. EBITDA % over revenues 35.2% 4.3% +30.9% from sale of services Net profit (loss) 234 (172) N.A. Net profit (loss) % over 15.6% (32.1%) +47.7% revenues from sale of services Financial Results In billions of Lit. 1st. semester '98 1st. semester '97 Change Operating cash flow 471 7 468 Change in net working capital 71 (19) 90 Investments (457) (257) (200) Net cash flow 85 (273) 358 Omnitel's Milestones In billions of Lit. 1st 2nd 1st 2nd 1st semester semester semester semester semester 1996 1996 1997 1997 1998 EBITDA (211) (183) 23 296 526 net loss/profit (259) (330) (172) 32 234 Cash Flow (642) (552) (273) (40) 85 * Exchange rate is calculated at 1766.6 Lira to 1 US dollar with the exception of Net Investment figures for which the exchange rate is calculated at 1782 Lira to 1 US dollar.