MILAN (Reuters) – Telecom Italia’s top investor Vivendi wants to play a bigger role at Italy’s largest telecoms group, calling into question the position of CEO Luigi Gubitosi after two profit warnings in three months, two sources close to the matter said.
Telecom Italia (TIM), whose earnings last week were described as “disappointing” by a source close to Vivendi, is burdened by high debt that hampers investments at a time when Italy is stepping up digital connectivity.
French media giant Vivendi, which holds 23.8% of TIM, wants to find in accordance with Italy’s government ways to relaunch the group and extract value from its landline grid, the company’s main asset, the sources said.
TIM’s network assets are considered strategic by the government and Treasury-owned state lender CDP has built a 9.8% in the group, becoming its second-largest investor, to oversee them.
Piling pressure on Gubitosi to reorganise TIM and turn around its business, Vivendi board’s representatives and other directors last week requested an extraordinary board meeting that will take place on Nov. 11, sources have said.
The possibility that TIM could raise money from deals involving its fixed-line infrastructure as Vivendi demands change lifted shares in the company by nearly 6% in afternoon trade.
The stock had fallen 17% this year against a 23% rise in Milan’s blue-chip index.
After initially declining to comment, Tim said in a statement that its board did not discuss possible corporate structures relating to the network and that no decision had been taken.
A spokesperson for Vivendi reiterated the French group’s commitment to contribute to TIM’s long-term success.
Any decision regarding network assets is key to TIM’s future.
Under former Italian Prime Minister Giuseppe Conte, TIM had agreed a plan championed by the Treasury to merge its fixed-line access network with those of state-backed rival Open Fiber.
However, key figures in the current ruling coalition led by Prime Minister Mario Draghi, including Innovation Minister Vittorio Colao, have poured cold water on the scheme, which envisaged TIM retaining majority ownership of the new entity.
In the past few months, Gubitosi has been trying to persuade Vivendi that handing CDP control of any network combination with Open Fiber was the only way to revamp the plan and overcome political and regulatory resistance to it, the two sources said.
Vivendi has so far been against TIM ceding control of its landline grid, but one of the sources said the French group could reconsider its stance under the right conditions.
(GRAPHIC: Tim share performance – https://fingfx.thomsonreuters.com/gfx/mkt/jnpwexgampw/TIM%20share%20performance%20vs%20peers.png)
Gubitosi won a second mandate as TIM CEO in March, with backing from both Vivendi and CDP. Former Bank of Italy official Salvatore Rossi was also reappointed as chairman.
Since then, TIM has cut its outlook twice, hit by the weak performance of its domestic business, which is dogged by ferocious competition, giving the French group leeway in its push for changes.
Asked by Reuters on the sidelines of an event in Rome whether he was aware that Vivendi was challenging CEO Gubitosi’s role, Chairman Rossi declined to comment.
With talks still ongoing, it remains to be seen how Vivendi’s demands will be met, the sources said.
(Reporting by Elvira Pollina and Giuseppe Fonte; Additional Reporting by Francesco Zecchini; Editing by Alexander Smith and Susan Fenton)
