Some of the most important telecommunication companies in Europe, saw their stock plummeting due to the recent turmoil caused by the Cyprus crisis. The shockwaves were sent in all directions and even countries that don't have a significant exposure in Cyprus, were affected. Telecom Italia is not only one of the most important players in the peninsula, but also has millions of customers in Argentina and Brazil. Technical indicators suggest that the stock is currently underpriced, and fundamental analysis seems to be pointing into the same direction, with the company having serious growth potential.
Italian Elections Crippled Telecom Italia Stock
At the beginning of the year, the stock price stood firmly above the $10 threshold but it dropped dramatically as a result of the chaos produced by the Italian elections. In early March and April the price sank below seven dollars per share only to quickly rebound without improving above the nine dollars limit. There are clear signs that the results are not caused by sheer weaknesses of Telecom Italia, with the FTSE Milan Index dropping several percentages immediately after the elections.
The stock briefly climbed above eight dollars but now that the company has cut its stock dividend, it should have an easier task in covering interest payments. The last couple of years have been particularly challenging for Telecom Italia and their coupon senior unsecured notes traded at dismal values. The rebound came immediately after the worst of the European debt crisis abated with the Cusip values exceeding 110. Most rating companies regard this bond as a BBB, with Moody being the most generous by awarding a investment-grade of Baa3.
Telecom Italia Driven By Foreign Markets
Telecom Italia is one of the largest telecom companies in the world and is constantly expanding beyond borders, with Brazil and Argentina being the most profitable markets. In Brazil they operate through a subsidiary that goes by the name of Telecom Italia Mobile Brazil. The numbers speak for themselves, with the Italian company having more than 7 million telephone lines at the beginning of 2013. By comparison, the Argentinean market is much smaller but they are inching closer to 20 million clients, and there are millions more who could join in the foreseeable future.
To put things into perspective, Telecom Italia has in excess of 30 million mobile telephone clients in Italy making it the leading player in its home country. They go beyond serving telephone lines and operate one national TV network out of three currently existing in Italy. Binary options traders need to know that the major shareholder for the company is Telco S.p.A., a consortium made of an insurance company, a telecommunication company and the Intesa Sanpaolo bank. Trading at less than seven dollars per share, Telecom Italia is cheap and fully justifies the purchase of call options that expire in one month or more.