Telecom Italia Non-Voting Shares Advance on Conversion Plan

  • Exchange could raise about $620 million for phone company
  • Nine-month revenue declined almost 7% to 14.9 billion euros

Telecom Italia SpA’s non-voting savings shares rose as much as 8.5 percent in Milan as the indebted carrier reported its first quarterly growth in domestic mobile-service revenue since at least 2010 and proposed converting the share class into common stock to generate cash.

The savings stock rose 4.2 percent at 9:15 a.m. local time to 1.02 euros, giving the carrier that is at the center of a contest for influence between two French billionaires a market value of 21.8 billion euros ($23.7 billion). The common shares declined 3 percent to 1.16 euros.

The board approved an exchange of the savings stock -- a type of securities dating back to the 1970s by a voluntary one-for-one exchange, the company said on Thursday. The move could raise about 570 million euros in proceeds, because holders of those shares would have to pay a cash conversion fee of 9.5 euro cents, representing about half of the difference in values between the two share classes.

Savings stock accounts for almost one-third of Telecom Italia’s share capital, and its conversion into voting shares -- the biggest overhaul of the phone company’s equity structure in 16 years -- would dilute the voting stake of Vivendi SA, the phone carrier’s largest shareholder. In Italy, savings shares don’t carry voting rights but companies are required to pay a dividend to the holders every year.

The board’s conversion proposal will be put to shareholders at meetings on Dec. 15 and Dec. 17, the company said. The plan also included a mandatory conversion for shares not tendered as part of the voluntary option.

Wireless consumer revenue in Italy rose 3.3 percent in the third quarter supported by increasing demand for more lucrative broadband offerings and as price competition eased, the Milan-based carrier said in a statement Thursday. For the first nine months, total sales fell 6.9 percent to 14.9 billion euros, Telecom Italia said.

Net debt at the end of September was 26.8 billion euros, exceeding the carrier’s market capitalization. Within the past month, Vivendi -- whose biggest shareholder is Vincent Bollore -- has disclosed a stake topping 20 percent, while Iliad SA founder and fellow French billionaire Xavier Niel has acquired securities that could give him a 15.1 percent holding.

Until earlier this year, Telecom Italia had been controlled by Spain’s Telefonica SA and a group of Italian financial investors. Their replacement by the two French shareholders comes as Chief Executive Officer Marco Patuano seeks to revive the carrier’s local business and sell assets to reduce debt.

Telecom Italia said it plans to reorganize the business that leases its landline network to rivals, folding its OpenAccess unit, which guarantees so-called equality of access to rivals, into its wholesale business.

Bond Buybacks

Nine-month net income fell 63 percent to 362 million euros, weighed down by expenses related to bond buybacks, the company said. The biggest mobile and broadband carrier in the country of about 60 million people also controls Brazil’s second-biggest wireless provider, Tim Participacoes SA.

In Brazil, Tim may be willing to start talks with Russian billionaire Mikhail Fridman’s holding company over a merger with smaller competitor Oi SA only if Telecom Italia maintains majority control of a merged carrier, people with knowledge of the matter said this week. Fridman’s LetterOne started exclusive talks with Oi last month to invest as much as $4 billion in the entity that results from a merger of Oi with Tim.

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