Fibre merger may result from fight between TIM’s rival shareholders

29 March 2019 | Alan Burkitt-Gray

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Rival shareholders in Telecom Italia – now TIM – are meeting today in Milan to decide the future of the troubled company.

BREAKING NEWS: On Friday afternoon Vivendi decided to support Elliott-backed Luigi Gubitosi as CEO. News here.

One outcome might be that the government of Italy supports a merger of TIM’s national fibre network with the rival Open Fiber network.

But first French media group Vivendi, with 23.9% of the shares, will be fighting to put five new directors on the board, in place of five that were nominated by Elliott, a US activist investor with just under 10%.

Cassa Depositi e Prestiti (CDP), the Italian state investment bank, has increased its stake to 10% and might end up with the key role in today’s meeting. CDP is also a 50% shareholder in Open Fiber – the other half belonging to energy company Enel – so would be instrumental in any fibre merger.  

Elliott has dominated the TIM board since a shareholders’ meeting last year, and both it and Vivendi have spent the past 12 months in an increasingly vituperative battle of words.

They have poured scorn on senior executives from both sides. Vivendi presented a report from TIM’s board of auditors that was critical of chairman Fulvio Conti and CEO Luigi Gubitosi (pictured). Two weeks ago the board rejected that criticism and expressed confidence in Conti and Gubitosi – who in 2018 displace former Vivendi executive Amos Genish from the CEO role.

Today Vivendi will be voting for the replacement of Conti, along with other Elliott-nominated directors Alfredo Altavilla, Massimo Ferrari, Paola Giannotti De Ponti and Dante Roscini.

In their place Vivendi wants to elect Franco Bernabè – a former CEO of the group – plus Rob van der Valk, Flavia Mazzarella, Gabriele Galateri di Genola and Francesco Vatalaro.

Both sides have lined up their consultants, including experts in the challenges of network separation. In 2012 Bernabè put just such a proposal to the Telecom Italia board, based directly on earlier schemes for BT and Openreach and Telecom New Zealand (now Spark) and Chorus. But the board said no and eventually Bernabè quit.

Now the Elliott team is also known to have network-separation experts in its retinue.

Last month TIM confirmed to Capacity that Gubitosi had met Elisabetta Ripa, CEO of Open Fiber, to discuss a possible merger of their national fibre networks.

TIM executives have separately confirmed to Capacity, on condition of anonymity, the logic of merging the two national fibre operations.

And early last year government minister Carlo Calenda supported network separation of TIM and a fibre merger, though Calenda’s Partito Democratico lost the March 2018 election.

Separately, the government is known to want to maintain majority Italian control of the critical infrastructure owned by TIM – both its national network and the Sparkle international terrestrial and subsea network. A TIM/CDP/Enel ownership of a merged Italian fibre operation would meet that requirement.

Sparkle’s future is likely to remain under TIM’s control, though some senior managers have raised the possibility of investment from outside companies.