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TIM shares fall over concerns on venture’s cashflow and debt

Telecom Italia fell on Monday after publication of details of the cashflow and debt levels of the venture created by the planned sale of its fixed line network failed to convince investors who also sold off heavily last week.

The market reaction increases pressure on Pietro Labriola, who is seeking a second mandate as TIM CEO at a shareholder meeting next month and aims to finalise the network sale to U.S. fund KKR later this year.

Milan-listed TIM dropped by as much as 10% on Monday to 0.20 euro per share, its lowest since December 2022, with traders citing a lack of confidence in the company’s ability to meet core profit targets and an excessive debt level.

The stock pared earlier losses later in Monday’s session to end 4.6% lower. Volumes remained high, with nearly 30% of the company’s ordinary capital changing hands in the last three sessions.

Backed by the Italian government and worth up to 22 billion euros ($24.02 billion), the deal is opposed by TIM’s top investor Vivendi, which questioned the sustainability of the remaining business. It is fighting the sale in court.

With its 24% stake, Vivendi could prove the main hurdle to Labriola’s reappointment if an alternative slate of candidates emerges ahead of TIM shareholder meeting in April.

At Labriola’s request, TIM held an extraordinary board meeting on Sunday, after the presentation of its three-year outlook last week prompted a share fall of 24%, the biggest daily fall in its shares on record.

The additional disclosure showed that after the planned grid divestment, net debt would rise by 1.4 billion euros this year to 7.5 billion euros, reflecting both ordinary and extraordinary costs, including 1.1 billion euros of financial charges.

Net cash flow is expected to be around zero in 2025 and about 500 million euros in 2026. Under three-year guidance issued last week, TIM forecast an 8% annual rise in core profit on a compound basis.

Debt, together with tough price competition in its home market, has long been seen as one of the factors holding back TIM, which has been shrinking its revenue and earnings over the last decade. Reuters

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