- Summary: Just under two years ago, Telecom Italia (NYSE:TI) paid €20 billion to acquire the 44% of Telecom Italia Mobile which it did not yet own. Today, Telecom Italia is expected to announce that it is looking for a buyer for its mobile unit, the country's largest mobile provider, while repositioning TI away from telecom services to becoming a media distributor. Chairman Tronchetti Provera reportedly met with News chairman Rupert Murdoch last week to discuss a content deal between the companies. TI stock has floundered of late: the company is burdened with €41 billion of net financial debt, making it particularly vulnerable to the telecom market's recent fluctuations. The company's stock price fell from €4 in 2001 to €2.26 on Friday. However, while reducing the debt and refocusing on media, TI will lose its most profitable business: TIM's preliminary revenue for the first half of the year was just under €5 billion and EBITDA was €2.5 billion; for the fixed line business, preliminary first-half revenue was almost €9 billion, and EBITDA was €3.9 billion.
- Comment on related stocks/ETFs: Back in March, Telecom Italia cut its mobile projections. One of the company's more valuable assets is its holdings in Tim Participacoes, the second largest Brazilian carrier. For more on struggling European telcos, see Deutsche Telekom's (DT) recent troubling earnings call transcript. In the US, however, Andrew Schmitt believes that cablecos will need to acquire wireless assets in order to remain competitive.
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