Telecom Italia Investors Write Down Holding to EU1.2 a Share

Telco SpA, the largest shareholder of Telecom Italia SpA, wrote down the value of its stake in Italy’s biggest phone company by 920 million euros ($1.2 billion) after the stock plunged 25 percent in a year.

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, wrote the investment down to 1.2 euros a share from 1.5 euros, according to a statement today from Telco.

The reduction is the fourth in four years as Telecom Italia and Europe’s other former phone monopolies struggle with losses of fixed-line customers and intensifying wireless rivalry. Telco, which bought the holdings for 4.1 billion euros in 2007, posted a six-month loss in the period ended in October of 818 million euros because of the impairments on Telecom Italia, the company said in the statement. Today’s reduction leaves Telco’s stake with a value of 3.6 billion euros on its books.

“This is a logical” writedown considering the market price of Telecom Italia shares, James McKenzie, an analyst at Fidentiis Equities, said in a note. The writedown is “a reminder of the liability that Telefonica, which owns 46 percent of Telco, has with Telecom Italia,” he said.

Debt Woes

Spain’s Telefonica, like Telecom Italia, is struggling to reduce debt as slowing sales weigh on earnings. Telco 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.

Telecom Italia shares have lost 74 percent of their value in the past six years. The stock fell 0.4 percent to 62.2 cents in Milan, giving the company a market value of 11.6 billion euros. Telefonica has declined 43 percent in the past six years and rose 1.6 percent today to 9.8 euros in Madrid.

Telecom Italia reported last week debt missing its target, forecast declining earnings for this year and said it plans to cut annual dividends to 450 million euros to preserve cash. The company met investors to propose a sale of hybrid securities, which help boost creditworthiness in the eyes of ratings firms, a person with knowledge of the deal said this week.

The strategy has yet to convince investors, as derivatives traders price its debt as junk and Moody’s Investors Service downgraded its senior unsecured notes to the lowest investment-grade rating this month.

Telecom Italia’s own board agreed yesterday to start exclusive talks with Cairo Communication SpA to sell its stake in the La7 television channel, excluding La7’s 51 percent holding in MTV Italia.

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