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MILAN (Reuters) -Telecom Italia (TIM) has issued its third profit warning in a year amid a boardroom battle that could result in its top investor Vivendi (OTC:VIVHY) pushing for a board reshuffle.
TIM, which must also decide how to respond to a takeover approach from U.S. fund KKR, said late on Wednesday it had cut the 2021 earnings forecast for its domestic business due to lower-than-expected fixed line revenue from its partnership with DAZN to screen Italian soccer.
Vivendi holds former CEO Luigi Gubitosi responsible for the group’s poor financial performance and could seek a board overhaul to oust him, four sources told Reuters on Wednesday.
The board will meet on Friday to discuss KKR’s 33 billion euro ($37.29 billion) proposal. If Gubitosi does not resign as a director at the meeting, Vivendi could request an extraordinary shareholder meeting be called to appoint a new board, two sources had said.
A board revamp could also be triggered by the resignation of a majority of directors.
Il Sole 24 Ore reported that the board meeting could delay the review of KKR’s approach, considering it instead in the coming months.
“Such a scenario slightly reduces the likelihood of a bid, testing the patience of KKR,” said Banca Akros analyst Andrea De Vita in a note.
TIM shares were 1.2% lower by 1040 GMT on Thursday.
The group now expects a “low teens decrease” in 2021 organic earnings before interest, tax, depreciation and amortisation after leases (EBITDA-AL) for its domestic business. In October, it forecast a “high single-digit decrease” for the business.
“This new guidance implies a very negative fourth quarter (for domestic business core earnings) compared to the 9.8% fall posted in the nine months, leading to a potential drop of more than 20% year-on-year,” De Vita said.
Earlier this year, TIM entered into a 1 billion euro deal with sport streaming service DAZN to try to boost its broadband and pay-TV services.
TIM is now looking to cut the cost of the deal after the accord to distribute Italy’s top flight soccer league matches generated less revenue than expected.
Any non-recurring provision will be determined in light of the ongoing negotiation of the DAZN agreement and will be booked in 2021, TIM said in a statement.
TIM, Europe’s sixth largest telecoms group, said it expected group organic EBITDA-AL for 2021 to be higher than 5.4 billion euros thanks to growth at its Brazil business unit, which was confirmed at a “mid single-digit” rate.
EBITDA-AL was 6.3 billion euros in 2020, according to TIM’s annual report, and the group had previously flagged a “mid-single digit” drop for this year.
Jefferies (NYSE:JEF) brokerage said consensus for 2021 organic EBITDA-AL was 5.8 billion euros at group level.
After a 435 million euro payment for licences, the company’s adjusted consolidated net financial debt is expected to be around 17.6 billion euros.
($1 = 0.8849 euros)
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Telecom Italia (MI:TLIT) (TIM) https://tmsnrt.rs/3m5VDEE
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