Reuters: Hot Stocks: UPDATE 1-Telecom Italia shares drop on report of capital increase

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UPDATE 1-Telecom Italia shares drop on report of capital increase Jul 31st 2013, 08:33 Wed Jul 31, 2013 4:33am EDT (Adds details, comment from small shareholder group) MILAN, July 31 (Reuters) - Telecom Italia shares fell more than 5 percent on Wednesday after a media report said its chairman had called a pre-board meeting to discuss the possibility of a capital increase. Telecom Italia's margins have been sharply eroded by tough competition and a deep recession in Italy, weighing on its share price and making it harder for the company to cut net debt which exceeds 28 billion euros ($37.10 billion). At 0826 GMT, Telecom Italia shares were down 5.8 percent at 0.511 euros. After the collapse of tie-up talks with cash-rich Hutchison Whampoa and Egyptian tycoon Naguib Sawiris earlier this year, Telecom Italia needs to find resources to cut its debt and fund investments in growing areas. Analysts have said a cash call or a possible sale of its Brazilian unit Tim Participacoes could be possible options. In an unsourced report, newspaper Il Messaggero said chairman Franco Bernabe was considering a cash call to help cope with financial difficulties facing the group. Telecom Italia, whose board will meet on Thursday to approve first-half results, was not immediately available for a comment. Small investors association Asati said on Wednesday it had called on the company's board to decide on capital strengthening measures to present to shareholders by the end of December. Its core investors - Telefonica and Italian financial institutions Generali, Mediobanca and Intesa Sanpaolo are disappointed with their investment in the phone group - whose market value has fallen four fold since they took control five years ago. The Messaggero said writedowns of up to 2 billion euros were expected to result in a first-half loss. ($1 = 0.7547 euros) (Reporting by Danilo Masoni and Stephen Jewkes; Editing by Erica Billingham) Link this Share this Digg this Email Reprints

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