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BUSINESS

Telecom Italia board members resign amid battle for control

Eight members of Telecom Italia's board of directors resigned on Thursday, triggering a re-election of the entire board as an activist investor fund has challenged the control over the company by France's Vivendi.

Telecom Italia board members resign amid battle for control
Telecom Italia's logo in Milan. Photo: Giuseppe Cacace/AFP

Activist fund Elliott had called for the removal of six board members at a shareholders meeting next month, complaining about Vivendi's management of Telecom Italia (TIM), which like many other former state monopoly operators has had trouble in the face of heightened competition and rapid technological change.

But in a statement released on Thursday, Telecom Italia said that eight directors had announced their resignation, which it says under the company's bylaws means that the entire board must be re-elected.

“In resigning, the aforementioned directors have expressed their hope that this move would help to clarify and provide certainty to the governance of the company,” said a company statement.

A shareholders meeting was called for May 4th to elect the new board.

Among those who quit was executive chairman Arnaud de Puyfontaine, who is also Vivendi's CEO, and whom Elliot had sought to remove.

“As chairman of TIM, and in the interest of all shareholders, I want to remove the current uncertainty around the board which is a distraction” from implementing the company's development strategy, de Puyfontaine said in a statement.

He said the May 4th meeting “will allow TIM shareholders to decide quickly on a new full board … rather than voting on piecemeal changes to the board as called for by Elliott.”

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.

Last week it called for a shake-up at the top “to improve both governance and performance at TIM”.

Despite controlling only 24 percent of ordinary shares, Vivendi has managed to gain de facto control over the company through getting its people on TIM's board and senior management.

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

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

De Puyfontaine said on Thursday that with the election of a new board “each shareholder will have the opportunity to choose between an industrial plan able to create value in the long term, and a programme of short-sighted financial engineering.”

A source close to Vivendi's management told AFP the firm “followed the path which seemed to respect real shareholder democracy”.

For the moment the French group remained silent about its intentions, but the vote will show the balance of forces among shareholders.

Elliott will need to find allies to carry the day at the shareholding meeting as it holds a stake of around 5 percent in TIM.

BUSINESS

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. 

Ahmad AL-RUBAYE / AFP
Ahmad AL-RUBAYE / AFP

“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.”

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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.

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