Elliott Ups Telecom Italia Stake as It Battles Vivendi for Control
Pushing for an overhaul of Telecom Italia's network strategy, activist investor Elliott Management has upped its stake in the Italian phone incumbent in a move dismissed as "opportunistic" by rival shareholder Vivendi.
A filing with the US Securities and Exchange Commission shows that Elliott has increased its stake in Telecom Italia to 9.4% from 8.8%.
French media conglomerate Vivendi remains the operator's biggest single shareholder, with about 24% of the company, but lost control of the Telecom Italia (TIM) board last year as it battled Elliott over the management of the business. (See Telecom Italia Chairman Blasts Vivendi as Shareholder Dispute Continues, Telecom Italia Caught in Clash of Clans While Rome Burns and Telecom Italia Molders as Shareholders Feud.)
CEO Luigi Gubitosi, an Elliott appointee who replaced Amos Genish in November, is eager to spin off Telecom Italia's fixed-line network and has apparently considered plans to merge the asset with Open Fiber, a state-backed operator rolling out a wholesale broadband network. Vivendi has been opposed to any such move. (See Telecom Italia to Spin Off Fixed Lines, Increase Automation.)
Earlier this month plans that Genish drew up for a less dramatic "legal" separation of the fixed-line network were shot down by Agcom, Italy's telecom regulator, which said such a move would not reduce Telecom Italia's market dominance, according to a Reuters report.
In its SEC filing, a copy of which Light Reading has obtained, Elliot said there were several options for enhancing shareholder value at Telecom Italia, including "the separation of its fixed line access network and the evaluation of market consolidation options, as well as the conversion of the saving shares."
It also flagged its opposition to any change in the composition of the Telecom Italia board, arguing this would be "detrimental to the execution and delivery of the user's anticipated value creation plans."
Investors will have the opportunity to elect new board members proposed by Vivendi during a meeting scheduled for March 29.
A Vivendi spokesperson slammed Elliott's latest move and said it had damaged Telecom Italia in recent months. "Elliott is acting as a pure financial investor, that is to say using an opportunistic approach to take advantage of the 45% drop in the share price," said the spokesperson. "The share price is currently so low because of Elliott's own terrible governance since May 4. There is currently no industrial plan."
Shares in Telecom Italia were up 3.8% in Milan today at the time of publication, when they traded at €0.42 per share, but have fallen by nearly a third since this time last year.
Telecom Italia sticks out as one of Europe's most heavily indebted telecom incumbents and operates in one of the continent's most competitive mobile phone markets, with four network operators fighting aggressively for market share.
Results published last year show that net debts stood at roughly €25.2 billion ($29 billion) in September, more than three times what Telecom Italia makes in annual earnings.
Heavy spending during an Italian auction of 5G spectrum has put the balance sheet under further pressure, with Telecom Italia coughing up about €2.4 billion ($2.8 billion) for new licenses. (See Italy's $7.6B 5G Bonanza Puts Telcos on the Rack.)
Established telcos including Telecom Italia, Vodafone Italy and Wind Tre -- which formed when 3 Italia and Wind Telecomunicazioni SpA merged operations -- have been hit by the arrival last year of Iliad, a French operator that has already signed up millions of customers to its low-price deals. (See Iliad Grabs 1M Customers by Day 50 of Italian Odyssey.)
— Iain Morris, International Editor, Light Reading