TIM lifted by expectations of single Italian broadband network

MILAN (Reuters) - Telecom Italia (TIM) TLIT.MI shares rose by more than 5% on Wednesday as investors anticipated an acceleration of talks with Open Fiber to create a single ultra-fast broadband network in Italy.

FILE PHOTO: Telecom Italia logo is seen at the headquarter in Rozzano neighbourhood of Milan, Italy, May 25, 2016. REUTERS/Stefano Rellandini/File Photo/File Photo

TIM on Tuesday postponed to the end of August a decision over the sale of a minority stake in its so-called secondary landline, after Rome requested it negotiates a wider deal to merge its network assets with those of Open Fiber.

A Milan-based trader said TIM’s decision to extend the deadline showed a commitment to reaching a deal with Open Fiber.

“We have never been so close to reaching a deal on the single-network,” Mediobanca Securities analysts wrote.

Despite months of talks with Open Fiber, a joint venture owned by state utility Enel ENEI.MI and state lender Cassa Depositi e Prestiti (CDP), issues regarding governance and regulation have so far stood in the way of a potential deal.

Carving out network assets to extract value and cut debt is a major part of Chief Executive Luigi Gubitosi’s business plan to 2022.

CDP also owns also a 10% stake in TIM, whose shares were up around 5% at 1030 GMT, outperforming Milan's blue-chip index .FTMIB. TIM shares have lost nearly 30% this year.

UBS analysts, however, cautioned against excessive optimism.

“We note the end of August might prove a very tight deadline to reach a deal considering its complexity and the multiple parties involved”, UBS wrote in a note to clients.

The economic downturn due to the pandemic has increased pressure on TIM’s underperforming domestic business, faced with stiffer competition in both broadband and mobile.

TIM reported a 10.7% fall in domestic revenue to 3.17 billion euros in the second quarter, slightly better than a consensus forecast of 3.152 billion euros.

The group now sees a mid-to-high single digit decrease in its domestic service revenue this year compared with a low-to- mid single digit fall forecast in March.

Reporting by Elvira Pollina, additional reporting by and Giancarlo Navach; Editing by Alexander Smith and Louise Heavens