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Telecom Italia CEO confident of victory over activist fund

Telecom Italia's CEO poured scorn on Wednesday on an activist investor fund's chances of breaking telecommunications giant Vivendi's control of the Italian company, ahead of two key shareholders meetings.

Telecom Italia CEO confident of victory over activist fund
Photo: Giuseppe Cacace/AFP

In March activist fund Elliott called for six board members to resign at the April 24th shareholder's meeting of Telecom Italia (TIM), and proposed its own replacements for those it considered to be working in the interests of Vivendi, TIM's largest shareholder with a 24 percent stake.

However on March 22nd eight members of the TIM board announced their resignations and another shareholders meeting was called for May 4th to elect a new board.

Asked by daily La Stampa about the prospect of Elliott weakening Vivendi's control of TIM at the meeting, CEO Amos Genish said: “It's not realistic.”

“We've got a good strategic plan and investors know this. I've met 120 in the last few weeks, and they ask for management continuity,” he added.

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.

During March's salvo against TIM's management it said that it had an around five percent stake in TIM, but daily La Repubblica claims that Elliott nows holds 9.9 percent, citing “financial sources”.

'Long-term partner'

Like many other former state monopoly operators TIM has had trouble in the face of heightened competition and rapid technological change.

Elliott blasted the 35 percent drop in the value of TIM'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”.

Israeli Genish, appointed last year as TIM's third CEO in as many years, is close to Vivendi's billionaire owner Vincent Bollore and insisted to La Stampa that the French company wasn't going anywhere.

“They have good intentions, a long-term industrial strategy and are ready to invest,” he said.

“Vivendi is along-term partner for TIM.”

Vivendi has de-facto control of the company thanks to its stranglehold on board and executive positions.

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

Genish said that de Puyfontaine will be candidate for chairman when Vivendi announces its “strong team” of candidates for the board on April 9th.

By Céline Cornu

BUSINESS

Activist investor wrests control of Telecom Italia board

Activist fund Elliott won its weeks-long power struggle with Vivendi over Telecom Italia by wresting control of the company's board at a shareholder meeting held near Milan on Friday.

Activist investor wrests control of Telecom Italia board
Telecom Italia (TIM) faced a crunch vote over board members. Photo: Miguel Media/AFP

US-based Elliott scraped past Vivendi, with 49.84 percent of voting shareholders' ballots going in the fund's favour and 47.18 percent of votes for the French telecommunications giant, which is run by billionaire Vincent Bollore and is the largest shareholder in Telecom Italia (TIM) with a stake of just under 24 percent.

Elliott hailed it as a victory for an “independent slate,” but it is a big win for the fund, which has about nine percent of TIM's shares and has been pushing for change at the top at TIM ever since it demanded the removal of six board members in mid-March.

“Today's win for the independent slate sends a powerful signal to Italy and beyond that engaged investors will not accept substandard corporate governance,” the fund wrote in a statement following the vote, in which over 67 percent of TIM's capital took part.

It will hold ten seats on the new board, with Vivendi given the remaining five, a huge blow to the French group after having previously had a stranglehold on board positions.

Vivendi immediately responded to the defeat by insisting that it would work to ensure that Elliott, sometimes called a “vulture fund”, would not “dismantle” TIM.

“We have five seats on the board, we are the main shareholder and we will continue to support [director and general manager] Amos Genish's strategy, which was voted for unanimously by the board,” said Vivendi's head of communications Simon Gillham.

'Very bad shareholder'

Gillham added that Elliott's was “not a market-driven victory” and that they won thanks to state-controlled entity Cassa Depositi e Prestiti, which holds a 4.7 percent stake in TIM and “made the difference by voting for a hedge fund instead of an industrial long-term shareholder”.

The Italian government has repeatedly criticized Vivendi's management, and tensions have often been high between Rome and the French group.

“Vivendi has been a very bad shareholder,” Economic Development Minister Carlo Calenda said in April. “I am in favour of foreign investment, but that does not mean remaining dormant when they [want] to destroy the value rather than to create it.”

Calenda's criticisms mirror those of Elliott, who have lamented TIM's performance ever since “Vivendi nominees” joined the board in December 2015.

The fund has castigated governance issues and “conflicts of interest” such as TIM's January 2017 awarding of an advertising contract to Havas, which is owned by Vivendi, worth a rumoured €100 million.

The charges filed last week against Vincent Bollore, CEO of the Bollore group that owns Vivendi, in connection with the awarding of two lucrative port concessions in West Africa, was for Elliott the “latest example” of the problems posed by Vivendi.

Elliott's ten nominees, all well-known to the Italian business community, include Luigi Gubitosi, current extraordinary administrator of failing airline Alitalia, and Fulvio Conti, former CEO of Enel. Conti will be TIM's new chairman.

Genish, who is close to Bollore, said on Sunday that his position would be untenable should Vivendi lose, but Elliott reiterated the support it showed the general manager in TIM's previous shareholders meeting last week.

“Elliott remains fully supportive of CEO Mr. Amos Genish and the entire management team and is fully aligned with Mr. Genish's business plan,” it wrote.  

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