Telecom Italia Holders Said to Plan Writing Down Stake

Telco SpA, the largest shareholder of Telecom Italia SpA, is considering writing down the value of its stake in Italy’s biggest phone company by at least 900 million euros ($1.2 billion), according to a person familiar with the matter.

Telefonica SA, Intesa Sanpaolo SpA, Assicurazioni Generali SpA and Mediobanca SpA, which together own 22.4 percent of Milan-based Telecom Italia through holding company Telco, will meet tomorrow to review the stake’s value, said the person, who asked not to be identified because the plan is private. The Telco board may lower the value by at least 30 cents a share from 1.5 euros, the person said.

A reduction would be the fourth in as many years as Telecom Italia and Europe’s other former phone monopolies struggle with losses of fixed-line customers and intensifying wireless rivalry. Telecom Italia’s own board agreed today to start exclusive talks with Cairo Communication SpA on selling the La7 television channel, exluding La7’s 51 percent MTV Italia stake.

Telco’s board will review a suggestion by adviser Lazard Ltd., which is giving a fairness opinion on the value of the stake in Telecom Italia, the person said.

Officials at Intesa, Telefonica, Generali and Mediobanca declined to comment. A Lazard representative didn’t return a call seeking comment.

Debt Pile

The shareholder cut the value of its holding by about 4 billion euros in the past four years. It valued Telecom Italia shares at about 2.7 euros each in 2008, cutting that to 2.2 euros in 2009, to 1.8 euros in 2011 and to 1.5 euros last year.

Telecom Italia stock, which has lost 25 percent in the past 12 months, rose 1.5 percent to 62.45 cents in Milan trading today, giving the company a market value of 11.7 billion euros.

Telco’s owners, which bought their holdings for 4.1 billion euros in 2007, agreed in May on a 3.4 billion-euro financing package, including a 600 million-euro capital increase, to help repay loans obtained to buy the stakes. The holding company posted a full-year loss in the fiscal year ended in April of 903 million euros because of the impairments on Telecom Italia’s value.

“Telco’s investors haven’t a way out, they made a bad investment at the peak of the market and can only try to limit damages, considering it’s impossible to sell their stake at the current levels,” said Fabrizio Spagna, a managing director at Axia Financial Research in Padua, Italy, who tracks Italian stocks. “I expect they will lobby to get higher dividends, even if there is little room for that.”

Dividend Cut

On Feb. 8, Telecom Italia reported debt missing its target, forecast declining earnings for this year and said it plans to cut its dividend. The company’s adjusted net debt fell to 28.3 billion euros at the end of December from 29.5 billion euros at the end of September. It had predicted it would drop to about 27.5 billion euros.

The carrier is halving annual dividends to 450 million euros to preserve cash. Directors will discuss goodwill writedowns of as much as 4 billion euros at a meeting today, Italian business newspaper Il Sole/24 Ore said last week.

Telecom Italia’s decision to cut the dividend followed Dutch carrier Royal KPN NV’s plan to sell 4 billion euros in shares after pouring cash into fast-wireless spectrum in the fourth quarter.

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