Vivendi sees current Telecom Italia CEO as short term solution, sources say

FILE PHOTO: French media giant Vivendi logo in Paris
FILE PHOTO: The logo of Vivendi is pictured at the main entrance of the entertainment-to-telecoms conglomerate headquarters in Paris, France, April 22, 2021. REUTERS/Gonzalo Fuentes/File Photo

November 12, 2021

By Agnieszka Flak , Giuseppe Fonte and Elvira Pollina

MILAN (Reuters) -Telecom Italia’s top investor Vivendi sees the current CEO of the former phone monopoly as a short-term solution given the company’s problems, two sources close the French media giant said on Friday.

TIM Chief Executive Luigi Gubitosi survived a boardroom showdown on Thursday at a meeting sought by Vivendi following two profit warnings in three months, but the French group is still calling his role into question.

The board meeting has shown that Vivendi’s concerns are well-founded and that management does not have a clear vision of how to respond to these concerns, one of the sources said.

Three separate sources have told Reuters Vivendi favours TIM Brasil CEO Pietro Labriola to replace Gubitosi at the helm of TIM. Vivendi declined to comment on this specific issue.

Telecom Italia was not immediately available to comment.

Vivendi holds 24% of TIM, an investment exposing it to a potential 1.8 billion euro ($2.06 billion) capital loss at current market prices.

Having failed to stem a steady revenue decline in TIM’s crowded domestic market, Gubitosi outlined to the board plans to address TIM’s challenges, including ways to extract value from its key network assets.

But his proposals, aimed at bringing investors into TIM’s assets under a spin-off plan, failed to get Vivendi’s backing.

TIM’s network assets are deemed strategic by the government, and Treasury-owned CDP has built a 9.8% stake in the group to oversee them and help counter Vivendi’s influence.

Both the French group and CDP in March backed Gubitosi’s reappointment and CDP has for now resisted Vivendi’s efforts to question his position, sources have told Reuters.

Asked to clarify whether it still supports Gubitosi, CDP declined to comment.

Innovation Minister Vittorio Colao, a former Vodafone boss tasked by Prime Minister Mario Draghi with implementing plans to boost Italy’s ultra-fast connections, is expected to play a key role in deciding the future of TIM and its CEO.

Colao has poured cold water on a project championed by the Treasury under Italy’s previous government to merge TIM’s fixed-line access network with that of state-backed rival Open Fiber.

Sources have said Gubitosi has been trying to revive the plan by convincing Vivendi that TIM should cede control of the merged entity, an option the French group has so far opposed.

($1 = 0.8737 euros)

(Editing by Maria Pia Quaglia and Barbara Lewis, Kirsten Donovan)