Indebted incumbent Telecom Italia is said to be considering a capital increase of up to €2bn (US$2.76bn) to prevent downgrades from Fitch and S&P.
Earlier this month, Moody’s stripped the telco of its investment-grade rating over concerns about its…
Indebted incumbent Telecom Italia is said to be considering a capital increase of up to €2bn (US$2.76bn) to prevent downgrades from Fitch and S&P.
Earlier this month, Moody’s stripped the telco of its investment-grade rating over concerns about its strategy to tackle its €39bn debt pile, which is higher than its €12.4bn market capitalisation.
TI may look to raise between €1.5bn and €2bn from shareholders and the idea could be presented at its next board meeting on 7 November, according to three people familiar with the matter cited by Bloomberg.
In a statement the operator said: “Telecom Italia points out that the rumours reported by the media today about alleged capital increase transactions, dismissals of assets, changes in the dividend policy, are press inferences which, as such, the company cannot comment on.”
A rights issue was proposed by TI’s former CEO Franco Bernabe in September. He supported a capital increase of up to €5bn to avoid a credit downgrade to junk status, which later came to pass.
Bernabe resigned at the beginning of the month, reportedly due to strategic differences. He was said to be against asset sales, which have reportedly been advocated by leading TI shareholder Telefonica.
However, TI may still choose to offload its majority stakes in operators in Brazil and Argentina, or cancel a proposed dividend.
Earlier this week the incumbent was reported to have shelved plans to spin off its fixed-line network.
Telefonica has recently agreed to buy shares from its partners in controlling shareholder vehicle Telco, which would put it in charge of the holding company and give it management control over the Italian operator.
This may create regulatory difficulties in Brazil and Argentina as Telefonica is TI’s direct competitor in those markets.
Following the news TI’s stock fell more than 8% from its opening price of €7.18, before recovering slightly to €6.73 as TelecomFinance went to press.
