Telecom Italia shares soar on Sanford Berstein report
Trading suspended with shares rising theoretical 9.25%30 August, 17:38
The rally followed an analyst's report from Sanford Bernstein ranking stock in Italy's largest phone company as ''outperform'' - meaning it is likely to outperform the market index, but still falls short of a ''buy'' recommendation - and posted a target price of .9 euro per share, or roughly 80% more than the prevailing prices for TI shares this summer.
Reasons given for brighter investment prospects were that ''Vodafone, Telefonica and AT&T'' could show interest in taking over the ex-State telephone monopoly.
Moreover, Telecom Italia's major shareholders might double their own investments in the near future, analyst Robin Bienenstock wrote.
TI led not only the FTSE MIB index of the Milan bourse, which was down .94% at 14:45, but also ranked among top performers in the European Stoxx 600 index on Friday.
Frenzied trading in TI stock reached more than 100 million units before being suspended. The positive report and price surge mark at least a temporary reversal of fortune at TI. On August 5, Fitch cut Telecom Italia's Long-term Issuer Default Rating (IDR) to 'BBB-' from 'BBB', with a negative outlook, adding to a host of problems facing Italy's biggest telephone company.
On the day of the ratings report, shares crept down 1.24% on the Milan bourse to 0.48 per share - one of its lowest levels in 16 years.
TI reported first half losses of 1.4 billion euros and issued a profit warning for the year. Results were pummeled by 2.2 billion euros in goodwill writedowns. The rating downgrade also followed news that the company's rival Vodafone Italia filed a civil lawsuit seeking more than one billion euros in damages for TI's alleged abuse of its dominant position on the fixed-line telephone network in Italy.
The lawsuit came after the Italian antitrust authority in May fined TI 103 million euros on similar charges.
TI has appealed the antitrust ruling and rebuffed Vodafone's accusations, saying the company is confident it will ''succeed in demonstrating the absolute correctness of its own behaviour''.