Telecom Italia plays down debt fears; Telco offers loan guarantees

8 Oct 2008

Telecom Italia chief executive Franco Bernabe has told employees that the company’s EUR37 billion (USD55 billion) debt is not a concern. In an e-mail to workers, Bernabe said: ‘Our debt situation is not worrying us…we have the capacity to meet all our obligations for the next two years without going to the market.’ He also confirms that the telco has received interest from overseas investors, though there have been no firm offers: ‘The expressions of interest that have come my way recently from international financial institutions and industry…confirm the esteem and attention which Telecom Italia attracts on the international level,’ Bernabe noted. Groups named as potential investors include the Libyan Investment Authority.

Meanwhile, Telecom Italia’s share price slipped to EUR0.86 on Tuesday, the lowest level since the start of 1998, Reuters reports, prompting speculation that major shareholder Telco would have to put up its entire 25% stake as collateral on its debt. A report in local newspaper MF said this situation would occur if the share price dipped below EUR0.85, but Telco later released a statement which confirmed that it is prepared to raise financing itself to guarantee loan obligations: ‘If needed, depending on the performance of Telecom Italia ordinary share price, Telco’s intention is to raise…the financial resources necessary to meet the financial covenants,’ Telco said in the statement. Telco is a consortium of companies which includes Spain’s Telefonica, Italian financial institutions Intesa Sanpaolo, Generali SpA and Mediobanca, plus the Benetton family. The group acquired its majority stake in Telecom Italia in April 2007, but has since seen the value of its interest more than halved as fears mount over the Italian firm’s debt levels and its conservative growth strategy.

Italy, Telecom Italia (TIM)