All the flaws of Tim by Vivendi. Report

13 September 20222 years ago babelfish

Tim on the stock exchange and management of the first shareholder Vivendi: what the reports of market analysts say

Why has the Telecom Italia stock on the stock market been floppy for some time? Does the stock of debt have anything to do with it? And with the largest shareholder, namely the French group Vivendi, did Tim improve or worsen the performance of the Telecom Italia stock in Piazza Affari?

These are some of the questions that some reports by market analysts and investment banks try to answer on Tim, the group headed by CEO Pietro Labriola, who succeeded Luigi Gubitosi (while in these days there are rumors of a reversal to the Tim's presidency at the urging of the French).

The debt issue is far from secondary given the project in progress of a single company for the network between Tim and Open Fiber which, among other things, would lead to a sharp reduction in the stock of debt now of the Tim group.

Recent reports on Tim – consulted by Startmag – investigate Tim's stock market performance in recent years and note an inconsistency in unison: Telecom Italia is one of the most important and liquid shares of the FTSEMIB index but, at the same time, a midcap for investors foreign institutions.

The stock of the Tim group is in fact at an all-time low of € 0.1916: last Friday the price fell below the psychological threshold of € 0.20 for the first time.

However, since the beginning of the year, the stock has lost 57.50%, underperforming both FTSEMIB (-22%) and, above all, the main European competitors (Vodafone -3.9%, Deutsche Telekom + 13.8%, Orange + 6.9% and Telefonica + 1.7%) which outperformed the European indices in the current year.

But has anything changed since Vivendi's Frenchmen became Tim's first shareholder a little less than 7 years ago?

Since the announcement (on 6 October 2015) of Vivendi's entry into Telecom Italia with a 19.9% stake, the share has lost 82%: underperforming both FTSEMIB (-2.2%) and its main European competitors.

And as of January 2016, under Vivendi management, Telecom has underperformed the FTSEMIB index in every single year.

However, analysts have generally maintained a positive bias: As of 2015, Buyers accounted for more than 50% of recommendations. Instead, institutional investors remained more cautious on Telecom Italia shares.

Surely the analysts' view remains mixed: 9 Buy / 13 Neutral / 2 Sell with an average target price of € 0.33 down from € 0.43 at the beginning of the year (23% cut).

But what are the causes of this sluggish performance of the Telecom Italia stock in Piazza Affari?

The market believes that this is due in particular to a number of reasons: pressures on the domestic business (fixed and mobile), high indebtedness (in turn due to LBO operations at the end of the millennium), absence of stable shareholders which led to numerous changes strategy (often contradicting each other).

Over the years, analysts have pointed out that Tim's management has increasingly focused on "creating value" for shareholders through extraordinary transactions rather than through a radical reorganization of the core business, we read explicitly in a report circulating among the insiders.

Furthermore, many analysts, while expressing a positive opinion, considered the divestments as purely financial – highlighting a (dramatic) lack of focus on operational and industrial trends.

The most critical, including UBS analysts, have instead argued that inorganic projects would not have solved Telecom Italia's structural problems, that is, on the one hand, relaunching the domestic business and on the other, debt sustainability. In particular, UBS placed a lot of emphasis on the fact that the debt would decrease only thanks to the proceeds from sales but, at the same time, how these flows were not sufficient to repay the debt in the absence of an improvement in industrial results.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tutte-le-pecche-di-tim-targata-vivendi-report/ on Tue, 13 Sep 2022 07:36:39 +0000.