Telecom Italia head to exit over tension with government
Mounting tensions between Telecom Italia’s CEO and its biggest shareholder, Vivendi, are threatening to bog down the carrier’s turnaround progress and put an early end to Flavio Cattaneo’s 16-month tenure.
Cattaneo is negotiating a possible exit after the dispute escalated in recent weeks, according to people familiar with the matter. Cattaneo is concerned that he can no longer manage Italy’s largest phone carrier the way he wants, and does not want to risk tarnishing his image and reputation by staying, said the people, who asked not to be identified. Vivendi, meanwhile, is unhappy with the CEO’s recent politically charged comments.
Cattaneo, a media-industry veteran, came on in March 2016 with Vivendi’s support and a mission to revitalise the former monopoly. While he has overseen domestic cost-cutting and wrung more revenue from broadband investments, the stock has declined about 17% during his tenure. Vivendi, the French media company led by chairman Vincent Bollore, has meanwhile grown concerned that Cattaneo’s combative style has damaged relations with the Italian government.
While changing CEOs will not help the cost-cutting process, “we also acknowledge that Cattaneo reached a sort of breaking point in the dispute with the government, which is not appropriate for an incumbent operating in a regulated sector”, analysts at Banca IMI said in a research note.
Cattaneo, 54, may leave Telecom Italia after reporting firsthalf results on July 27, two of the people said. A spokesman for the Milan-based carrier denied there were tensions and said there were no discussions about the CEO’s departure.
A Vivendi spokesman declined to comment.
Telecom Italia fell as much as 2.9% on Monday, the most in three months, and was the second-worst performer in Milan’s FTSE MIB index. The stock declined 2.5% at 12.24pm, giving the company a market value of €15.7bn.
“This noise is not helping, as it could divert attention from the great results the company is achieving in terms of restructuring the core business and relaunching the top-line growth,” Fabio Pavan, an analyst at Mediobanca in Milan, wrote in a note to clients on Monday.
Vivendi aims to name its chief convergence officer, Amos Genish, as one of the executives to run Telecom Italia, though he would not be CEO, one of the people said. Appointing Genish as GM would be less politically problematic than naming him CEO, because he is not Italian.
Genish has a successful track record, most recently as CEO of Telefonica’s Brazilian unit. Before that, he was cofounder and head of GVT Holding, a Brazilian telecommunications company that was controlled by Vivendi for a time.
No final decisions have been made, and Cattaneo and Vivendi could resolve their differences and decide he should stay as Telecom Italia’s chief, the people with inside information said.
Cattaneo’s contract calls for him to get about €40m in shares and cash if he leaves the company while it is on track to beat its 2018 financial targets, according to a “special award” clause he arranged when he took on the position. The bonus is linked to targets for boosting operating profit and cutting expenses and debt.
In the last few weeks, Cattaneo and Telecom Italia clashed with the Italian government over telecommunications coverage in rural areas. The government engaged Open Fiber, a joint venture between state lender CDP and Enel, to build a new national fibre network.
Telecom Italia is competing in broadband in rural areas through a project called Cassiopea, a plan that could damage the government’s effort to boost local investments, Claudio De Vincenti, minister for territorial cohesion and southern Italy, told Corriere della Sera last month.
In a hearing on June 28, Cattaneo told lawmakers that public tenders for fibre networks in rural areas have been designed to ensure victories for Open Fiber. Italy’s Economic Development Minister Carlo Calenda called Cattaneo’s comments unacceptable.
Vivendi, which owns about 24% of Telecom Italia, recently won EU Commission approval to control the phone carrier and installed its CEO, Arnaud de Puyfontaine, as executive chairman of the former Italian monopoly in early June.
The Paris-based company, led by billionaire Bollore, is pushing to create the dominant media group in southern Europe, with assets including pay-TV provider Canal Plus and record label Universal Music Group.
CATTANEO REACHED A BREAKING POINT IN THE DISPUTE, WHICH IS NOT APPROPRIATE IN A REGULATED SECTOR