Telecom Italia’s CEO says network solid as Elliott cuts stake

MILAN/ROME (Reuters) – Telecom Italia’s network can cope with the surge in traffic driven by the coronavirus crisis in the country, CEO Luigi Gubitosi was quoted as saying on Wednesday, as U.S. activist fund Elliott cut its stake in the phone group.

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

The strategic role of TIM’s network – as well as its needs for an upgrade – has taken center stage in the healthcare emergency, which has confined Italians to their homes, forcing millions to embrace smart-working and online-teaching.

“TIM’s network is well-built. It is very solid and stable and can hold, with no problems, additional traffic,” Gubitosi told the newspaper Corriere della Sera.

His comments follow a decision by Elliott to reduce its stake in the former phone incumbent to 6.97% from 9.72%. A person familiar with the matter, who asked not to be named, cited a “portfolio rebalancing” given the market situation.

The person said Elliott remained committed as a TIM investor and supported the group’s board and management.

By 1023 GMT shares in Telecom fell 2.4%, underperforming a 0.3% rise in Milan blue-chip index.

Paul Singer’s fund with assets under management of about $35 billion has been increasingly active in Europe, taking stakes in some of the region’s largest companies, including SAP, Bayer and Altran in the past year.

Investors face losses as the coronavirus outbreak devastates financial markets, driving the pan-European STOXX 600 index down by a quarter year-to-date.

Gubitosi said that anti-coronavirus lockdown measures imposed by Italy’s government had nearly doubled traffic on landlines while traffic on mobile lines had risen by 30%.

“We believe that Telecom Italia has proved to be one of the most resilient businesses since the outbreak of the virus as more and more users are connected to TIM’S network,” Pietro Solidoro, an analyst at broker Fidentiis said in a note.

“We believe that Elliott’s commitment to Telecom Italia has remained unchanged despite the slight reduction in the position.”

Reporting by Elvira Pollina, Giulia Segreti; Editing by Kim Coghill and Barbara Lewis

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