Telecom Italia shares rebound on bright signs of business

MILAN, Nov 10 (Reuters) – Telecom Italia (TIM) (TLIT.MI) shares rose more than 5 percent on Thursday after the former phone monopoly said its battered domestic business had improved despite a difficult operating environment.

The future shape of TIM, which has 25 billion euros of debt, remains to be resolved, with chief executive Pietro Labriola seeking a deal for its landline telephone network and the new government weighing potential alternatives to consolidate Italy’s broadband market.

TIM shares have fallen about 50% since the start of the year, and its third-quarter core profit fell 11%, roughly in line with expectations.

Domestic churn or cancellation rates are the lowest in five years, Labriola said, highlighting the positives in its latest report.

“The TIM continuity plan is underway: we promised to do better than expected, and we will keep that promise despite a tougher macroeconomic environment,” he told analysts.

“You can see improvement and a positive outlook for all the metrics,” he said, adding that this year’s guidance is already in sight.

TIM is targeting a decline in core profit of “under 10 percent” this year, weighed down by its domestic business, which is facing stiff price competition.

“While the Italian market does remain competitive, we can see some clear signs of improvement in customer churn and the increase in mobile networks,” Newstreet Research said in a report.

Reinvent your business

TIM has been negotiating a multi-billion-euro sale of its valuable fixed-line grid to state-owned bank CDP, which is keen to take control of the national broadband network champion that combines TIM’s grid with that of its smaller unit Open Fiber.

The single network project, sponsored by former Prime Minister Mario Draghi’s government, is being reassessed by the right-wing government that was sworn in last month.

A potential reconsideration of the plan to create a unified network champion would include a CDP-backed takeover bid for the entire TIM, with Vivendi (VIV.PA) and the infrastructure fund joining the process, the sources said.

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

As part of an effort to reform its domestic business, TIM spun off its enterprise services division to provide connectivity services to large enterprise customers as well as cloud, IoT and cybersecurity businesses.

Labriola said the move, which is expected to pave the way for selling a minority stake in the business, remains an “option.”

Reporting by Elvira Pollina Writing by Keith Weir Editing by Agnieszka Flak

Our Standard: The Thomson Reuters Trust Principles.

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