Telecom Italia shares bounce on brighter signs for business

Telecom Italia shares bounce on brighter signs for business
© Reuters. FILE PHOTO: The Tim logo is seen at its headquarters in Rome, Italy November 22, 2021. REUTERS/Yara Nardi

By Elvira Pollina

MILAN (Reuters) -Telecom Italia (TIM) shares rose more than 5% on Thursday after the former phone monopoly flagged some improvement in its battered domestic business despite tough operating conditions.

The future shape of TIM, which has 25 billion euros of debt, is still to be settled, with Chief Executive Pietro Labriola seeking a deal for its landline grid, while the new government weighs potential alternatives for consolidation in the Italian broadband market.

TIM, whose stock has lost some 50% since the start of the year, reported an 11% drop in its core profit in the third quarter, broadly in line with expectations.

Labriola said that the domestic churn or cancellation rate was the lowest in five years and stressed the positives in the latest report.

“The TIM continuity plan is proceeding: we promised to do better than forecast and we are keeping this promise despite a tougher macroeconomic environment,” he told analysts.

“You can see improvement on all metrics and with positive outlook,” he said, adding that guidance for the year was now in sight.

TIM has a target for a “low-teens” percentage rate decrease in core profit this year, dragged down by its domestic operations, where it is struggling with stiff price competition.

“Although the Italian market does remain competitive, we can see some clear signs of improvement on churn and mobile net adds,” Newstreet Research said in a report.

RESHAPING THE BUSINESS

TIM has been in talks over a multi-billion euro sale of its prized landline grid to state lender CDP, which is keen to control a national broadband network champion combining TIM’s grid with that of its smaller unit Open Fiber.

Sponsored by the previous government of Prime Minister Mario Draghi, the single network project is being reassessed by a right-wing government sworn in last month.

A potential rethink of the plan to create a unified network champion would include a CDP-backed takeover bid for TIM as a whole, with Vivendi (OTC:VIVHY) and infrastructure funds joining the process, sources have said.

Labriola told analysts a network deal with CDP remains “the best choice” to unlock synergies.

As part of efforts to revamp its domestic business, TIM has spun off its enterprise service arm, offering connectivity services for big corporate clients as well as cloud, Internet of things and cybersecurity businesses.

The move is expected to pave the way to the sale of a minority stake of the business, which remains an “option”, Labriola said.

Source: Reuters