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. Last Updated: 07/27/2016

Uproar Prompts Review Of Telecom Italia Revamp




MILAN, Italy -- Telecom Italia has taken a step back on its controversial restructuring plan and offered to sweeten its terms to quell a revolt by investors who have dumped Telecom stock after it was unveiled a week ago.


Facing his first crisis since taking over Telecom Italia in June, CEO Roberto Colaninno apologized Tuesday for the rumpus caused by his plan to strip Telecom Italia of its lucrative cell-phone network as he strove to patch up his bruised credibility.


"Unfortunately what's happened has happened. I'm sorry and I hope the shares rise again," Colaninno told analysts at the start of a road show campaign designed to woo back investors' battered confidence.


Telecom Italia shares shed more than 10 percent last week as minority shareholders rebelled against plans to hive off the group's 60 percent stake in Telecom Italia Mobile, or TIM, and transfer it to Olivetti's takeover vehicle Tecnost to help pay off 15 billion euros ($16.16 billion) of takeover debt. Minority shareholders accused Telecom of trampling on their rights and balked at plans to compensate them for the loss of Europe's largest cellular network with new shares in Tecnost.


While sticking to his guns on the broad outline of the plan, Colaninno partially conceded to investor pressure and said the financial terms of the plan could always be tweaked as the original had only been meant as an "indicative hypothesis."


"If I see that things are not going well, they could be changed, but there must be the same parameters and guidelines," he said, implying that he was willing to raise the amount of Tecnost shares awarded to Telecom shareholders in compensation for losing TIM. "I wouldn't do anything you didn't like."


Analysts remained skeptical.


"It's no great secret that he has to change the terms, you just have to look at the share prices. I think Colaninno has done nothing to improve his credibility and he'll get a real grilling from analysts in London," one analyst said.


"He said some conciliatory words, but at the same time remained firm and almost antagonist on certain points, and downgrading last week's announcement sent confusing signals to the market."


On the Milan bourse, Telecom Italia and Tecnost shares were scarcely brushed by Colaninno's comments and closed flat at 8.539 euros ($9.20) and 1.993 euros respectively while Olivetti dipped 1.47 percent to 2.0770 euros.


However, TIM shares slid more than 2 percent to 5.623 euros as Colaninno shifted the focus back to Telecom as the group's star asset and presented a host of unsurprising results forecasts.


Under fire from analysts, Colaninno said the terms of the plan announced last week had only been meant "to evaluate the impact on the market," and blamed poor communication as the real culprit of last week's uproar.


"He was clearly talking down TIM and talking up Telecom to his advantage on the ratio. Investors will remain livid with anything less than a ratio of 1.85 Tecnost shares," a Milan based dealer said.


The Telecom chief originally proposed that minority shareholders receive between 1.5 and 1.65 Tecnost shares to add to each Telecom Italia share.