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Telecom Italia says network investments paying off

Telecom Italia posted falls in 2014 annual revenue and core profit on Friday, hit an economic downturn, competition and regulatory pressure in its home market, but said sales were recovering thanks to its network investments.

Europe's fifth-largest telecoms operator by revenue said its strategy of investing to build faster broadband networks and meet demand for bundled services was paying off.

By the end of last year it had covered 80 percent of the Italian population with 4G and reached 131 cities with fibre optic cables.

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The company's 2014 revenue fell 7.8 percent to 21.6 billion euros ($24.5 billion), also weighed down by an economic slowdown in Brazil - its No.2 market.

However it said the situation in Italy, its biggest market, improved in the course of the year thanks to improvements in its fixed and mobile businesses.

The pace of the decline of domestic sales halved to 4.4 percent in the fourth quarter compared with the first quarter.

The company's earnings before interest, tax, depreciation and amortisation (EBITDA) fell 7.9 percent to 8.8 billion euros. Both revenue and core profit were broadly in line with an analyst consensus estimate compiled by the company.

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Shares in Telecom Italia have risen 18 percent in the last 12 months, driven by consolidation expectations in Italy and Brazil.

But they remain undervalued compared with their peers due to the company's high net debt, which fell to 26.65 billion euros at the end of December from 26.81 billion a year earlier.

By 0809 GMT the stock was up 0.5 percent at 1.027 euros, outperforming a 0.2 percent gain in the European telecoms index.

Later on Friday Telecom Italia will disclose its new three-year business plan, which analyst say is expected to increase investments to further roll out its domestic fibre network and to improve its mobile network in Brazil.