MILAN (Reuters) – Shares in Telecom Italia (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 market conditions.
The cut puts pressure on Chief Executive Luigi Gubitosi, who won a second term in February, backed by TIM’s main investors, French media group Vivendi and state lender CDP. A source close to Vivendi said late on Wednesday the company remained committed to TIM despite the disappointing results.
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, versus a previous forecast for a low-to-mid single digit decline.
This comes after the group said in July it would fail to stabilise core profit this year.
TIM also pushed back a goal to stabilise domestic service revenues in 2021, forecasting a low single digit decrease.
Banca Akros analysts said in a note the guidance cut, while not completely unexpected, “signals a difficult scenario and will trigger further estimates downgrades”.
Like other European peers, TIM is grappling with aggressive price competition on its crowded home market, which accounts for nearly 80% of sales.
TIM 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.
In the third quarter, EBITDA-AL fell 7.6% year-on-year to 1.46 billion euros, just below an analyst consensus provided by the company of 1.47 billion euros. Domestic revenues fell 3.2% year-on-year, in line with expectations.
By 0710 GMT, the stock was down 5.6% to 0.32 euros after earlier hitting a low of 0.31 euros, a level last seen in early November 2020.
($1 = 0.8624 euros)
(Reporting by Agnieszka Flak and Elvira Pollina; Editing by Keith Weir)
