Telecom Italia Says Capital Increase Not on Board Agenda

Telecom Italia SpA, Italy’s biggest phone company, said a capital increase isn’t on the agenda of a scheduled board meeting tomorrow, responding to an Il Messaggero report that Chief Executive Officer Franco Bernabe may make a proposal at a meeting with directors today.

“The company clarifies that the discussion of a capital increase is not an item on the agenda of the board of directors meeting on Aug. 1,” Milan-based Telecom Italia said in a statement.

Telecom Italia shares, which dropped as much as 6.5 percent after the Il Messaggero article, pared some of the losses and traded 4.5 percent lower at 52 euro cents as of 10:42 a.m. in Milan. The company has a market value of 9.4 billion euros ($12.5 billion).

With net debt about triple the company’s market value and a credit rating just one step shy of junk, Telecom Italia is working on a spinoff of its fixed-line assets to generate proceeds and had considered a merger of its wireless assets with Hutchison Whampoa Ltd.’s local division. Talks with Hong Kong-based Hutchison have collapsed in recent weeks.

Bernabe may meet with directors today before tomorrow’s board meeting to approve first-half results, Il Messaggero said, without citing anyone. The CEO may also propose goodwill writedowns of as much as 2 billion euros which will lead to a first-half loss, according to the newspaper.

“Should the current trend persist and in absence of corporate action carried out by the end of the year, a capital increase would become an increasingly necessary option,” Andrea Devita, an analyst at Banca Akros in Milan, wrote in a note today.

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