The Telecom rally stops. After +18% in five sessions thanks to the explosion of M&A operations in the telephone sector (Kpn, Verizon Wireless, E-Plus), Telecom shares are deflating this morning in Piazza Affari where they lose 3,1% to 0,543 euros . A slide, operators report, triggered right from the opening of the Stock Exchange by the judgment of Ubs which confirmed the 'sell' recommendation, however cutting its estimates of earnings per share by more than 20% and bringing the target price to 0,34 euro for ordinary securities and 0,27 for savings.
Swiss analysts consider "Telecom Italia's fundamentals simply unsustainable" considering the debt/equity ratio at 80/20, the expected growth in 2013 to 3.02 from 2.91 of the debt/Ebitda multiple and an average trend of -8% of cash operating flow in the period 2012-15.
"The contraction in profits seems to us to be structural", adds UBS, underlining that in this context there is little visibility on all the relevant aspects of the Telecom dossier: the trend in profits, the actions to reduce the debt on which the risk of a downgrade by the rating agencies; the evolution of the Telco issue, the holding company that owns the reference package of the telephone group; the renewal of the management given that the board expires in April 2014 and the Italian macroeconomic and political outlook.
