Telecom Italia saw Q1 sales and net profit slump, not helped by “structural weaknesses” in its domestic market. Growth in mobile data and fixed-line broadband is still not strong enough to offset revenue losses in traditional services, such as voice, messaging and circuit-switched data.

Core revenue in Italy, which account for around two-thirds of group turnover, fell by 9.5 per cent, to €3.47 billion, during the first three months of 2014 (Q1 2013: €3.83 billion.)

The consumer segment, making up around half of domestic core revenue, shrank by 11.7 per cent, to €1.75 billion, over the same period.

The decline was mainly due to a 16.9 per cent drop in mobile service revenue (equivalent to €152 million), and loss of revenue from traditional voice (€129 million) and messaging (€38 million) .

There was fairly high growth from mobile internet browsing, up 11.4 per cent, but that was from a small base. The rise was the equivalent to only a modest €17 million.

Telecom Italia said that while “competitive dynamics cooled” in its domestic market, particular in the mobile telephony sector, ARPU from traditional services continued to fall “partly as an initial result of a repositioning strategy towards bundle and/or combined fixed-mobile plans”.

The Italian incumbent said that this strategy would help it maintain market share and help stabilise revenue in the medium to long term.

“We have accelerated our investments in new technology, strengthening our leadership in fixed and mobile ultra-broadband coverage,” said CEO Marco Patuano (pictured). “This has not meant a loss of financial discipline, with major efficiency programmes on both costs and on traditional capex.”

Even so, net profit – at a group level – still fell from €364 million (Q1 2013) to €222 million. Group sales dropped 12 per cent, year-on-year, to €5.19 billion.

Patuano nonetheless remains confident that a content agreement with Sky will start to reap benefits this year through the introduction of premium offers, starting this summer with the broadcast of the World Cup to mobile devices.

Revenue from the TIM Brasil group were flat at BLR4.7 billion (€1.55 billion). Strip out the effect of cuts in termination rates, however, and mobile service revenue would have grown by almost 5 per cent in Brazil – “an undoubtedly notable result,” claimed Patuano.

Telecom Italia’s net financial debt stood at €28.8 billion as of 31 March 2014, up from €27.9 billion three months previously.