Telecom mess

7 August 2008 By Rachel Sanderson

The share price of the beleaguered and highly leveraged operator has reportedly fallen low enough to break a debt covenant. That could bring in the banks. Behind the share fall is a wrangle between shareholders and Bernabé, the boss. A crisis point can t be far off.

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Debt covenants owned by Telecom Italia's holding company Telco have been breached because of a fall in its share price, according to Italian financial newspaper Il Sole 24 Ore. The breach was triggered because the average TI share price remained below E1.3 for 25 consecutive working days. In theory, this means that around 17% of the shares should be transferred to the lending banks.

Intesa Sanpaolo, one of the lending banks and a Telco investor, would not confirm or deny the report. Other shareholders from Telco could not be immediately reached. A Telecom Italia spokesman said the company was not in a position to comment.

Telecom Italia's share price has fallen 46% in the year to date, underperforming a 26% fall on average for its European telecoms peers (see graph).

The company is due to report first half results on Friday.

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