UPDATE 4-T.Italia shares hit 10-year low as debt fears grow
(Updates shares)
MILAN, March 7 (Reuters) - Telecom Italia (TLIT.MI) shares slid to a 10-year low on Friday as a grim sales outlook and plans to expand overseas in a much-heralded new strategy stoked fears over its costly debt.
Europe's fifth largest phone group by market capitalisation said it would nearly halve its dividend to help pay for net debt of 35.7 billion euros ($55.01 billion), well above Telecom Italia's market cap of 29.4 billion euros.
Cutting the dividend on 2007 results will bring a theorical saving of more than 1 billion euros compared to what shareholders cashed in last year.
"The debt is worrying. It is not sustainable for a company to have 35 billion euros in debt with revenue of 31 billion euros, especially now that it's so difficult to raise capital on the markets," said one trader.
The cost of debt will be 5.6 percent in 2008, Telecom Italia said, in line with last year.
By 1440 GMT, shares were down 9.63 percent to 1.4370 euros, having earlier hit a record low of 1.43 euros. The group's credit default swaps widened to 235 basis points.
Telecom Italia had one of the highest dividend yields in the sector when it was owned by Italian businessman Marco Tronchetti Provera, but he sold out to a group of investors including Spanish telecoms giant Telefonica (TEF.MC) last year.
Those new owners, who control the firm with a 23.6 percent stake, changed the management team in December, appointing as chief executive Franco Bernabe, who headed the company once before in the late 1990s and came from Rothschild.
Telefonica Chairman Cesar Alierta said the new strategy "has our total support," when speaking to journalists on Thursday.
NO FIREWORKS
Bernabe said on Friday his team would work hard to give investors confidence in the company.
"Don't expect fireworks from us," he told analysts at a presentation in Milan. "We are down-to-earth managers," he said, adding the group did not have the money to do otherwise.
The plan aims to reverse years of falling profits and a shrinking international presence by cutting debt and expanding in countries including Brazil and Argentina, where Telecom has already faced regulatory scrutiny as Telefonica operates there. Continued...
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