Telecom Italia (TIM) is moving forward with a decisive plan to unify its capital structure. Specifically, the company intends to merge its savings shares into ordinary stock. This strategic pivot follows a major financial recovery. Consequently, the move clears the path for the company to reward shareholders with dividends for the first time since 2022.
By moving to a unified single-share class, TIM aims to modernize its corporate governance. Additionally, this change will strip away unnecessary administrative expenses. The transition is also expected to improve the trading liquidity of its ordinary shares significantly. As a result, the company will likely become more attractive to a broader range of global investors.
A Billion-Euro Win Drives the Transformation
The timing of this equity overhaul is very strategic. Recently, a €1 billion legal victory regarding disputed historical fees provided the necessary capital. This massive settlement acts as a financial stabilizer for the company. Therefore, TIM can restructure its balance sheet without straining its daily operational budget.
The initial market response to this news was swift:
- Savings Shares: These experienced a sharp 9% spike early in the day. Eventually, they held a steady 4.5% gain.
- Ordinary Shares: In contrast, these saw a minor contraction and dipped by approximately 2.2%.
Understanding the Two Conversion Paths
Investors will officially decide the fate of this proposal during a vote on January 28. The plan offers two distinct tiers for current savings shareholders to consider.
First, there is the Voluntary Phase. Shareholders who opt-in during this initial window will receive one ordinary share for every savings share they hold. Furthermore, they will receive a cash bonus of €0.12 per share.
Second, the company has planned a Mandatory Phase. Any shares that are not converted during the voluntary period will transition automatically. These will also convert at a 1:1 ratio. However, the cash adjustment for these shares drops significantly to €0.04.
The Impact on Strategic Investors
This consolidation will certainly alter the voting landscape for TIM’s biggest backers. For example, Poste Italiane is currently the most influential holder with a 27.3% stake. After the conversion, its voting power will likely dilute to roughly 19.6%.
Despite this lower percentage, Poste Italiane has expressed support for the move. In fact, industry reports suggest the group may seek to regain its influence through a strategic asset swap. This could involve trading its PosteMobile unit to TIM in exchange for more equity. Additionally, prominent investor Davide Leone has endorsed the plan. He called the terms fair and balanced for all share classes.
The Path to Long-Term Financial Stability
While the upfront cost of this conversion is approximately €630 million, the long-term outlook is bright. By eliminating the preferential payouts required for savings shares, TIM is on track for massive savings. Specifically, the company expects to save roughly €1 billion over the coming years.
These projected savings are the cornerstone of the company’s future strategy. They will allow TIM to restart dividend distributions in 2026. By removing complex layers of equity, the Italian telecom giant is positioning itself for a much more stable future.
