Telecom Italia's core profit rose nearly 4 percent in the first quarter, slightly ahead of forecasts, on the back of strong demand for broadband Internet and expansion by mobile unit TIM. Earnings before interest, tax, depreciation and amortisation totalled 3.30 billion euros ($4.24 billion). Revenues climbed 4.4 percent to 7.10 billion euros. A Reuters poll of 10 analysts last week produced a median EBITDA forecast of 3.289 billion euros on revenues of 7.126 billion euros.

Net debt jumped to 43.5 billion euros from 32.8 billion on December 31 after the group borrowed 12 billion euros to fund a tender offer for shares in TIM. The Reuters poll had seen the debt figure at 43 billion euros.

The former monopoly said in a statement it had already worked off 3 billion euros in debt from after the TIM tender.

"Net debt was slightly better than I expected," said Raj Sinha, a J.P. Morgan telecoms analyst. "The issue for TI is get net debt down as quickly as possible and get cash out of it with dividend payments."

Telecom Italia is aiming to work off all the extra debt taken on for the TIM buyout by the end of 2007.

The group said its fixed-line arm, which has benefited from the broadband boom, increased its revenues by 1.3 percent to 4.35 billion euros and EBITDA grew 3 percent to 1.99 billion.

The number of broadband accesses provided by the group stood at just over 5 million at the end of April - up from 4.87 million at the end of March - with 4.44 million in Italy.

Copyright Reuters, 2005