Open Fiber and TIM infrastructure merger comes closer after Vivendi’s retreat  

01 April 2019 | Alan Burkitt-Gray

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Opinion is divided about the implications of Friday’s decision by Vivendi to call an armistice in its battle with Elliott over control of TIM, the former Telecom Italia.

Vivendi, with 23.9% of the shares went into a shareholders’ meeting in Milan set to vote to oust five directors nominated by activist investor Elliott, with 9.2% of the shares. But at the last moment it backed down and decided to support the Elliott directors, including CEO Luigi Gubitosi.

Gubitosi had appealed to Vivendi for shareholders to work together. “We are prepared to give credit to the CEO,” said the French media company’s head of legal affairs, Caroline Le Masne de Chermont, on Friday.

It looks as though the second biggest shareholder, state investment bank Cassa Depositi e Prestiti (CDP) with 9.8%, played a mediating role in the background. CDP and energy company Enel between them own rival wholesale company Open Fiber.

The Italian state wants TIM’s infrastructure business to be separated out into a separate company, Openreach-style, and merged with Open Fiber. Existing and former TIM executives have spoken to Capacity of the logic of a separation and merger into one national wholesale fibre business. And Elliott is being indirectly advised by at least one former Openreach executive with the idea of putting together a network-separation plan.

Meanwhile Bloomberg Opinion’s Alex Webb said that Vivendi boss Vincent Bolloré “has blinked”, by climbing down. “After a year characterized by intransigence on both sides, it was a significant step toward ending a conflict that has seen shares in the former Italian national carrier lose more than a third of their value.”

Webb focused on the possible structure of the TIM board rather than TIM’s future strategy. “One way to ensure this fragile peace holds might be to give CDP three board seats, with six apiece going to Elliott and Vivendi. That would spread the influence a little more evenly, limiting the mutual antagonism, while giving Vivendi one more seat than it currently enjoys.”

However the French business newspaper Les Echos was sceptical. “Some reconciliations look like irremediable divorces,” was its cynical comment, forecasting that Elliott and Vivendi will not have much time “to swim in an illusory happiness”.

The future “is now in the hands of the Italian state”, said the paper. In other words, CDP will decide. An Open Fiber/TIM infrastructure merger to create a new wholesale carrier in Italy became much more likely after Friday’s meeting.