The head of Telecom Italia has reportedly told politicians that the operator needs to raise cash to avert a ratings downgrade, which would see the incumbent’s debt cut to junk.
Speaking to the Italian Senate in a hearing, Franco Bernabe said that…
The head of Telecom Italia has reportedly told politicians that the operator needs to raise cash to avert a ratings downgrade, which would see the incumbent’s debt cut to junk.
Speaking to the Italian Senate in a hearing, Franco Bernabe said that asset sales may take too long to raise capital quickly enough and that investors could provide an injection instead.
The Italian incumbent has been striving to cut its net debt – which stood at €28.8bn (US$38.8bn) as of 30 June – to €27bn (US$36.4bn) by the end of the year.
A rights issue could generate €3bn to €5bn for the stricken telco, a source familiar with the situation told Reuters. Following Bernabe’s comments this morning, Telecom Italia shares have dropped almost 3% in trading.
The declaration comes a day after Telefonica announced plans to gradually take control of Telecom Italia through upping its stake in Telco, the Milan-based telco’s largest shareholder.
The Spanish giant’s move has been criticised by Telecom Italia’s five independent board members, who reportedly said that the deal only brought benefits to a few shareholders. They worried that Telefonica may force asset sales, which could harm the long-term future of the company.
Telefonica’s approach to cut its own debt has centred on selling off assets. Should Telefonica wrest control of Telecom Italia, then regulators in Latin America may require disposals in Argentina and Brazil where the two companies currently have competing subsidiaries.
Meanwhile Italy’s prime minister Enrico Letta also expressed concerns about the deal. He was quoted saying today that he was not worried about a Spanish company looking to take control of the incumbent, but went on to described some of Telecom Italia’s assets, such as its network, as “strategic”.
