March 30, 2016 / 4:51 PM / 3 years ago

UPDATE 1-Telecom Italia picks Flavio Cattaneo as new CEO

* Cattaneo to replace Marco Patuano who resigned March 21

* First tasks include INWIT stake sale, Brazil unit fate

* Picked because of T.Italia exposure, political links -sources (Adds details, context)

By Agnieszka Flak and Stephen Jewkes

MILAN, March 30 (Reuters) - Telecom Italia has appointed state-industry veteran Flavio Cattaneo as chief executive to replace Marco Patuano, who resigned over what sources said were clashes over strategy with top investor Vivendi.

Milan-born Cattaneo, already a board member at Telecom Italia, takes over as the former state phone monopoly steps up investments in an ultrafast broadband network, a pet project of Prime Minister Matteo Renzi who wants to get Italy up to speed with the rest of Europe.

The decision after a two-hour board meeting on Wednesday was unanimous, one source added.

“Cattaneo’s someone who knows how to speak to the market and he’ll need that given all the challenges Telecom Italia faces,” a person who knows the executive said.

Cattaneo inherits a heavily indebted company whose revenues have declined steadily amid tough competition in its mature home market and which is now also grappling with an economic downturn in Brazil, its key foreign market.

Sources said political connections, a strong track record in regulated industries and close links to companies of interest to Vivendi argued for Cattaneo’s appointment.

Vivendi, headed by French magnate Vincent Bollore, has built up a stake of 24.9 percent in Telecom Italia.

Cattaneo, close to the head of influential investment bank Mediobanca, also sits on the board of Italy’s biggest insurer Generali, where sources said Bollore recently exerted his influence to appoint a Frenchman to the top spot.

The 52-year-old has wide experience at Italian state-controlled firms, including as director general at broadcaster RAI and CEO of power grid operator Terna. He had been widely tipped to succeed Patuano, who quit on March 21.

While Cattaneo is not seen as close to Renzi, he is well-connected to Silvio Berlusconi at a time when Vivendi is said to be seeking an alliance with the former prime minister’s broadcaster Mediaset over its pay-TV business.

Cattaneo’s experience at RAI and his two years at Telecom Italia as board member fit with Bollore’s plan of turning the Italian phone group into a telecommunications and content platform, with a strong focus on southern Europe.

“He’s one of the few people of his age that combines experience in content and running a regulated business,” a source said.

His nearly nine-year tenure at Terna have also cemented his reputation as a turnaround guru after he expanded operations beyond its core regulated grid business to improve returns for investors, they added.

“He did very well in Terna, developing new business and generating margins for the company,” one of the people said.

Cattaneo currently serves as CEO of Italian railway company NTV, which he brought back to profit earlier than expected.

The need to turn round Telecom Italia may involve politically sensitive job cuts. Sources said the need for more aggressive cost cutting had caused friction between Patuano, a group veteran, and Vivendi.

The sale of a stake in tower unit INWIT and the fate of Telecom Italia’s Brazil unit will be among the first decisions Cattaneo will have to take.

Patuano considered TIM Participacoes a strategic asset while Vivendi has been pushing to exit Brazil, sources have said.

“The mix of a new CEO coupled with a more aggressive stance from the main shareholder could translate into a speed up in terms of corporate actions,” one trader said.

Telecom Italia’s shares closed down 0.3 percent. (Additional reporting by Pamela Barbaglia, Ilaria Poleschi and Danilo Masoni; Editing by Ruth Pitchford)

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