MILAN (Reuters) - Telecom Italia ended the session on the Milan Stock Exchange down nearly 24 percent on concerns about debt levels, cashflow and dividend payments.

Last night the group announced its new three-year structure and targets following the planned network sale and today they were presented to the market.

The stock hit its lowest levels since December 2022, with volumes more than 12 times the daily average of the past 30 days.

The stock market slump was a blow to CEO Pietro Labriola, who is running for a new term at the helm of the group at next month's shareholders' meeting.

"We can't hide the fact that the market is reacting in a particular way," Labriola told analysts during the investor day, seeking reassurance about the company's ability to meet targets, which call for an average 8 percent annual increase in Ebitda.

Debt has long been considered one of the factors holding Tim back, along with tough competition in the domestic market.

Analysts pointed out that the projected level of debt for the company to be created from the sale of Tim's domestic fixed-line network, which is expected to be completed in the middle of this year, is higher than market expectations.

"The leverage target of 1.6-1.7 times [the company's Ebitda] implies an increase in debt of about 900 million euros compared to the pro-forma level at the end of 2023 of 6.15 billion euros," Intesa Sanpaolo analyst Andrea de Vita wrote in a note.

NETWORK TRANSACTION

The sale of Tim's network to Kkr, valued at up to 22 billion euros and backed by the Italian government, is the centerpiece of Labriola's efforts to reduce debt by 14 billion and shift most of the workforce to the network.

Vivendi, Tim's main shareholder, has questioned the company's sustainability after the network sale and has resorted to legal action.

The higher-than-expected debt level could be related to cash outflows related to the network before closing and the Brazilian subsidiary's dividend policy, as well as financial charges and restructuring costs, according to Domenico Ghilotti of Equita.

Cfo Adrian Calaza pointed out that running the company as still integrated with the network business for at least half of this year will likely have a negative impact on cash flows.

"Cash generation will start from 2025, even for domestic operations," he said.

Analysts also pointed out that the company did not include dividend plans in the outlook statement, an issue Calaza said is premature to discuss.

(Italian version Sabina Suzzi, editing Claudia Cristoferi)