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05 March 2009

Telecom Italia denies need to tap shareholders

Telecom Italia has ample ability to finance its debt and does not need a capital injection from Libya's sovereign wealth fund or other investors, the company's chief executive Franco Bernabè said. Telecom Italia's €34bn ($42.8bn) of net debt was sustainable and the company was both reducing the nominal level and well able to finance it through the capital markets, he said.

There is persistent speculation about whether it will seek another outside investor, much to the company's irritation.

Telecom Italia yesterday said it was not considering a capital increase, in a sharply worded denial of a press report that it might need to tap shareholders for cash to pay for its investment plans.

A consortium led by Telefónica of Spain is Telecom Italia's biggest investor, with a 24.5 per cent stake.

Mr Bernabè told the Financial Times that any outside investor could buy Telecom Italia's stock in the market. "Our stock is traded in the market and if they [Libya], like everybody else, want to buy a stake they can buy it there," he said. Telecom Italia stock was trading at under 90 euro cents a share yesterday. The Libyan Investment Authority was reportedly considering buying a stake of up to 10 per cent in Telecom Italia last September, but it made no firm offer.

Instead, it turned its sights on UniCredit, where it could emerge as the biggest single shareholder after supporting a share issue by the Italian bank. It is also said to be eyeing a stake in Eni, the Italian energy giant. On Monday, Tripoli ratified a wide-ranging agreement with Italy that could pave the way for more investment.

Mr Bernabè said Telecom Italia had already refinanced 25 per cent of its debt so far this year. "We have no problem whatsoever in funding our debt," he said, adding that the company had also been able to cut its debt by €1.7bn in 2008 as a consequence of "a very strong decline in costs".

Telecom Italia said in December that it would lay off employees and dispose of non-core assets as it sought to address investor concerns about the debt and its operating performance.

Last week it announced a fall of just under 10 per cent in net income for 2008 and a cut in its dividend to €0.05 a share from €0.08.

Mr Bernabè described the move on the dividend as "prudent". He said investors needed to be patient, adding that only a focus on cost-cutting would restore shareholder value. He said: "There is no transformative value in the present markets; the focus needs to be on cutting costs."

Source: Financial Times



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