Battle brewing for control of Italy’s TIM

Activist fund Elliott has fired the first shots in a battle with French giant Vivendi over Telecom Italia, writing on Friday to shareholders to ask for the removal of six board members, including the Italian operator's boss.

Battle brewing for control of Italy's TIM
The logo of Telecom Italia (TIM) in Milan. Photo: Giuseppe Cacace/AFP

The request to shareholders is part of a ruthless fight over the Italian company's future ahead of its annual general meeting next month.

Elliott, which says that it has a five percent holding in Telecom Italia (TIM), has criticized largest shareholder Vivendi's management.

Now the firm has asked for a shake-up at the top, “to improve both governance and performance at TIM”.

“Elliott believes that the company is managed in the interest of Vivendi and to the detriment of all other TIM shareholders,” it wrote.

“Yet, Vivendi controls only 24 percent of the ordinary shares and its stake represents only 18 percent of total equity value.”

Among the board members Elliott wants to remove is executive chairman Arnaud Roy de Puyfontaine, also Vivendi's CEO, when the AGM is held on April 24th.


Sometimes called a “vulture” fund, Elliott has regularly invested in companies in difficulty or whose shares it considers undervalued, and often engages in showdowns with those companies' management.

Vivendi, owned by French billionaire Vincent Bollore, responded on Friday by saying it will examine Elliott's statement with an “open mind” but called the firm “a hedge fund well known for its short-termist initiatives”.

“It is not sure that the plan to dismantle the group and destabilize the teams will create value,” it said in a statement.

Vivendi might have a minority holding in TIM but has de facto control of the company thanks to its stranglehold on board and executive positions.

TIM's current CEO Amos Genish, appointed last year, is close to Bollore. Genish is TIM's third CEO is as many years.

Michel Sibony, appointed as Head of the Procurement Unit and Real Estate Department last week, holds several functions within the Bollore Group and Havas, says Elliott. He was named Chief Value Officer at Vivendi just before Christmas.

'No regard'

Elliott's suggested six board replacements include Fulvio Conti, former CEO of utility multinational Enel and Extraordinary Commissioner of airline Alitalia Luigi Gubitosi, who between 2007 to 2011 was CEO of fellow Italian telecommunications company Wind.

“Elliott believes that these six candidates can empower the board to correct the persistent undervaluation that is undeniably present at TIM,” it said.

Earlier this month TIM announced largely positive results for 2017, with group EBITDA, a measure of operating performance, up nearly five percent year-on-year to €8.7 billion and revenues up nearly three percent to just under €20 billion.

However, Elliott says that TIM's stock “remains highly undervalued notwithstanding improving fundamentals” and that the growth last year came after “years of persistent declines.”

It highlighted the 35 percent drop in the value of the company's share price from when who it calls “Vivendi nominees” joined the board in December 2015 to “the day before our interest in the company was made public”.

It cites several instances of Vivendi “exercizing its control without regard for minority shareholders' divergent interests”.

Among them was TIM's January 2017 awarding of an advertising contract to Havas, which is owned by Vivendi, worth a rumoured €100 million.


By Terry Daley


EU finds Italy’s Alitalia loans ‘illegal’ but airline free to keep money

The EU's antitrust authorities ruled Friday that Italy's 900 million euro loans to long-struggling airline Alitalia were "illegal", but cleared the country's new carrier to get state funding and avoid paying back the money. 


“Following our in-depth investigation, we reached the conclusion that two public loans worth EUR 900 million granted by Italy to Alitalia gave the company an unfair advantage over its competitors, in breach of EU State aid rules,” said EU competition chief Margrethe Vestager said in a statement.

“They must now be recovered by Italy from Alitalia to help restore a level playing field in the European aviation industry.”

But the authorities in Brussels simultaneously said new flag airline ITA – set to start flying next month – was not liable to reimburse the money and that 1.35 billion euros being injected into the firm by Rome did not breach state aid rules.

“Italy has demonstrated that there is a clear break between Alitalia and the new airline ITA, and that its investment in ITA is in line with terms that a private investor would have accepted,” Vestager said.

“Once ITA takes off, it is for Italy and ITA’s management to make use of this opportunity once and for all. And we will continue to do our part to ensure fair competition in the European aviation sector.”


Loss-making Alitalia was placed under state administration in 2017 but Italy has struggled to find an investor to take it over. The situation was only exacerbated by the coronavirus pandemic that grounded airlines worldwide.

The Italian government gave the company two loans for the amount of EUR 600 million and EUR 300 million in 2017, as Alitalia scrambled for liquidity without access to the debt market.

Earlier this year Italy said it had reached an agreement with the European Union for a bailout that creates a new debt-free company to take over some of Alitalia’s assets – ITA.

The board of directors of ITA last month approved a binding offer for 52 of Alitalia’s aircraft, related airport slots and other assets.

The Italian government has created a 100-million-euro ($117-million) fund to reimburse Alitalia customers.

Italy provided state loans to Alitalia totalling 1.3 billion euros between 2017 and 2019.

In July, it approved another 700 million euros for ITA.

Further sums are expected in 2022 and 2023, bringing the total to 1.35 billion euros.