- Telecom Italia (TIM) has unveiled a plan to convert its high-cost savings shares into ordinary stock, following a €1 billion legal win over concession fees that strengthens its balance sheet.
- The proposal aims to simplify TIM’s capital structure, cut dividend obligations and improve liquidity but raises questions on shareholder dilution and broader market strategy.
What happened: Plan to convert savings shares after legal payout
Telecom Italia S.p.A (TIM) has initiated a long-anticipated plan to convert its costly savings shares into ordinary stock, a move made possible by a €1 billion ($1.2 billion) legal victory in a long-running dispute over concession fees with the Italian state.
Under the proposal, TIM’s savings shareholders would be offered one ordinary share plus €0.12 in cash for each savings share during a voluntary conversion period. Savings shares not converted in this initial phase would be converted at the same ratio with a reduced €0.04 cash adjustment.
Savings shares represent a sizeable portion of TIM’s capital structure, offering higher guaranteed dividends but carrying no voting rights. Their abolition is intended to simplify a complex share class structure and reduce ongoing dividend obligations that have weighed on the company’s financial flexibility.
Following the announcement, TIM’s savings shares climbed as much as 9 % in early trade, while ordinary shares fell 2.2 %. The company has scheduled shareholder meetings for January 28, 2026 to vote on the conversion proposal.
Poste Italiane, TIM’s largest shareholder with about a 27.3 % stake, supports the plan despite potential dilution that would reduce its holding to approximately 19.6 %. The Italian postal service is also examining options to rebuild its stake, including possibly transferring its phone services business, PosteMobile, to TIM in exchange for shares.
Davide Leone, whose London-based investment firm is the largest holder of TIM’s savings shares, has welcomed the conversion terms as “market-friendly,” indicating confidence among key investors.
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Why it’s important
The proposal reflects TIM’s effort to streamline its capital structure and improve corporate governance, eliminating a share class that has been costly and complex to manage. Savings shares had carried guaranteed dividend costs of around €166 million annually and lacked voting rights, presenting challenges for investor alignment and liquidity.
The legal victory enabling this plan stems from a long-running concession fee dispute that has been a significant financial overhang for the company. The reimbursement provides TIM with cash flow flexibility that could facilitate the resumption of dividend payments that have been paused since 2022.
Analysts suggest that eliminating the savings share class could yield about €1 billion in long-term savings, though the initial cost of the conversion is estimated at around €630 million.
However, questions remain about the broader strategy for TIM in a highly competitive Italian and European telecom market. Recent attempts at consolidation, such as merger talks with Iliad, have faltered, leaving the company to compete with rivals including Vodafone-Fastweb and Wind Tre.
Separately, TIM has sold major assets such as its fixed-line network to private equity in efforts to reduce debt, a backdrop that illustrates the strategic pressures facing legacy operators in Europe’s telecom sector.
Streamlining the share structure may improve investor appeal, but whether this, combined with asset sales and capital restructuring, will restore growth or market confidence remains to be seen.
