By Elvira Pollina and Agnieszka Flak
MILAN (Reuters) -Shares in Telecom Italia (MI:) (TIM) fell as much as 7.9% on Thursday to an almost one-year low after Italy’s biggest telecoms group further cut its 2021 core profit guidance to reflect worsening conditions in its domestic market.
Like other European peers, TIM is grappling with aggressive price competition in its crowded home market, which accounts for nearly 80% of group sales, and is facing the upcoming entry of low-cost French rival Iliad into the fixed-line business.
TIM said it expected its earnings before interest, tax, depreciation and amortisation after leases (EBITDA-AL) to post a mid-single digit drop this year, compared with a previous forecast for a low-to-mid single digit decline.
The group said in July it would fail to stabilise core profit this year.
TIM shares were down 5% to 0.32 euros by 0910 GMT after earlier hitting a low of 0.31 euros, a level last seen in early November 2020. The stock has lost 12% since the beginning of the year against a 21% rise in Milan’s blue-chip index.
Banca Akros analysts said in a note the guidance cut, while not completely unexpected, “signals a difficult scenario and will trigger further estimates downgrades”.
The downward revision puts pressure on Chief Executive Luigi Gubitosi, who won a second term in February, backed by TIM’s main investors, French media group Vivendi (OTC:) and state lender CDP.
A source close to Vivendi said on Wednesday the company remained committed to TIM despite the disappointing results.
Gubitosi hopes to tackle some of the domestic challenges by developing so-called adjacent business units, such as cloud, cybersecurity and Internet of Things ventures and is considering options for its portfolio of services and network assets, including potential alliances and new investors.
The company said its board had discussed a possible reorganisation on Wednesday to extract value from the group’s assets and had asked Gubitosi to continue study options.
“More pressing, in our view, is a clearer plan for stabilising core activities, including a constructive response to Iliad’s inevitable broadband entry,” Jefferies (NYSE:) analysts wrote in a research note.
($1 = 0.8624 euros)
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.