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Player Avatar Weeeeeeeee (< 20) Submitted: 5/7/2011 11:03:07 AM : Outperform Start Price: $12.49 TI Score: -57.25

I've invested in the Telecom Italia prefered (savings) shares, symbol TITR, listed on the exchange of Milan. The savings shares have no voting rights, but in exchange for this you get a minimum dividend of 5% of the nominal value of the shares (E 0.55) when the company makes enough profit, and you will always receive a dividend that is 2% of the nominal value of the shares higher than the dividend on regular shares. This means that dividend yield for this year was about 8%, and if management's statements that they want to raise dividend payout by 30% over the coming years come true, you will be looking at a yield of 10%-11%. Combine this with a P/E of around 6, P/CF of 2.5, P/B of 0.6 and you are already looking at a very attractive investment. Granted, their ROE is not very impressive (although not too bad either), but at current prices this just means there is still a lot of room for improvement; and that is exactly what the company is trying. A few weeks ago, key members of the executive board were replaced by people brought forward by the largest shareholder, Telco, which is a joint venture set up specifically to own a large stake in TI, and of which Spanish Telefonica is in turn the largest shareholder. I expect that this new board will continue to increase shareholder value by cost cutting operations in Italy, further reducing debt (which is already quite low compared to a lot of competitors) and increasing operations in emerging market South America, notably Brazil and Argentina.There is still a possibility that Telefonica will choose to increase its stake in TI, especially for the current low prices (they bought their current stake a couple of years ago when the regular share was still trading above E 2,-, and maybe buy the entire company in order to strengthen its own position in Latin America. This is far from certain of course.All in all, I believe TI shares, and especially the savings shares, are a very promising long term investment.

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