UPDATE 1-Telecom Italia shares up on expectations for asset sales
(Adds analyst comment, details)
MILAN Oct 9 (Reuters) - Telecom Italia shares rose on Wednesday on expectations of asset sales by the company, reversing initial losses prompted by a downgrade in the firm's credit rating to junk by Moody's.
Moody's cut the company's credit rating to "Ba1" from "Baa3" because of a failure to strengthen its balance sheet, making it more expensive for the heavily-indebted group to borrow money.
The downgrade, which analysts said was broadly expected, comes ahead of a Telecom Italia board meeting on November 7 when new CEO Marco Patuano is expected to shed light on what measures the company will take to cut 29 billion euros ($39 billion) of debt and reverse years of sluggish growth.
Patuano replaced Franco Bernabe, who resigned earlier in October after clashing with core shareholders led by Telefonica who had rejected his plan for a share issue of up to 5 billion euros to cut debt and fund badly needed investments.
Analysts expect the company to sell off assets under the leadership of Patuano, including the company's prized Brazilian unit TIM Participacoes.
"A debt downgrade may mean relatively little for Telecom Italia in the near term," said Bernstein analyst Robin Bienenstock in a note.
Shares in Telecom Italia were up 2.8 percent at 0.63 euros by 0846 GMT after earlier falling 2 percent. The stock is close to record lows.
U.S. investment management company BlackRock has built a stake of over 5 percent in Telecom Italia because of a "very attractive valuation."
In response to Moody's downgrade, Telecom Italia said the group was solid, and that cutting debt would continue to be a priority.
The company has enough cash resources to cover debt maturities due over the next couple of years, according to analysts' estimates. ($1 = 0.7355 euros) (Reporting by Danilo Masoni. Editing by Jane Merriman)