Telecom Italia to explore options for assets after fresh guidance cut

© Reuters. FILE PHOTO: Telecom Italia's logo is seen at its offices in the Rozzano neighbourhood of Milan, Italy, May 25, 2016. REUTERS/Stefano Rellandini

By Elvira Pollina and Agnieszka Flak

MILAN (Reuters) -Telecom Italia (TIM) will press ahead with plans to attract new investors and get greater value from its assets, its CEO said on Thursday, after the group further cut its 2021 core profit guidance on the back of worsening conditions in its domestic market.

The fresh downward revision, announced late on Wednesday, follows a cut in July and heaps investor pressure on Luigi Gubitosi, CEO of Italy's biggest telecoms group, who won a second term in February.

A source close to TIM's top investor Vivendi (OTC:VIVHY), which backed Gubitosi's reappointment in February, said late on Wednesday that the French media company remained committed to TIM despite the group's disappointing results.

However, a person with knowledge of the matter said Vivendi had written to TIM Chairman Salvatore Rossi on Thursday asking that an extraordinary board meeting is convened to discuss the reorganisation.

TIM shares closed down 5.7% at 0.3175 euros on Thursday 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.

Debt-laden TIM is grappling with aggressive price competition in its key home market, with revenue and margins shrinking as the group faces the costs of upgrading its network and revamping its business.

Banca Akros analysts said in a note the guidance cut, while not completely unexpected, "signals a difficult scenario and will trigger further estimates' downgrades."

TIM said its board had discussed on Wednesday a possible reorganisation of the group's business to get greater value from the group's assets and had asked Gubitosi to continue to study options.

"What I got yesterday was an encouragement to continue the exploration and then to report back the opportunities that we have," Gubitosi told analysts in a conference call on Thursday.

TIM has previously planned to tackle some of the domestic challenges by developing fast-growing adjacent business units, such as cloud, cybersecurity and Internet of Things ventures.

A sale of a minority stake in its cloud unit Noovle could be carried out in the second half of next year, Gubitosi said, adding that an upcoming business plan would be "more stringent" on costs.

Other parts of TIM's business could be carved out to allow the entrance of new partners, following similar deals the group secured for its mobile and fixed-network assets.

"We are very committed on extracting value from our portfolio", Gubitosi said.

($1 = 0.8624 euros)