March 14, 2018 / 8:06 PM / 9 months ago

EXCLUSIVE-Vivendi CEO could suspend powers as Telecom Italia chairman after activist move

(Adds details, quotes, context)

By Agnieszka Flak

MILAN, March 14 (Reuters) - Vivendi CEO Arnaud De Puyfontaine may suspend his executive powers as chairman of Telecom Italia to support a debate on strategy after activist fund Elliott built a stake in the former state phone monopoly, a Vivendi spokesman said.

Last week Elliott Advisors said it had taken an unspecified stake in Telecom Italia (TIM) and was ready to replace board members in a drive to improve strategy, value and governance.

The move was widely seen as a challenge to the way top investor Vivendi runs the company.

“During the period devoted to this strategic debate, Arnaud de Puyfontaine has indicated that he is considering suspending his executive functions at TIM,” the Vivendi spokesman said.

The French media group, which owns 24 percent of TIM, said on Wednesday it supported the new strategy announced by the Italian company last week and was committed to creating an Italian telecoms and content champion.

“However, like any other shareholder sensitive to leveraging its investments, Vivendi would be ready, if necessary, to support another strategy capable of generating a short term rise in the TIM share price,” the spokesman said.

“As always, the shareholders will decide.”

Vivendi has invested close to 4 billion euros ($5 billion) in TIM since first becoming a shareholder in mid-2015. It has increasingly tightened its grip on the company by appointing two-thirds of its board and naming its own chief executive as the phone group’s executive chairman.

The hands-on approach has led to tensions with some other shareholders and the Italian government, which considers TIM of strategic national importance. Rome eventually used the so-called “golden power” last year to ensure it had a say in some strategic decisions at TIM.

TIM has lost more than one-third of its market value since Vivendi first took a stake, though the French investor says the phone group’s share price had been declining for a decade before that. It is down more than 70 percent since the start of 2005.

TIM has not paid a dividend since 2012, but last week new Chief Executive Amos Genish held out the promise of richer shareholder returns with a new three year strategy meant to help it cope with new rivals appearing in both broadband and mobile.

Vivendi said the 2018-20 plan was an “ambitious and realistic” move to boost TIM’s financial performance. Some brokerages, including Goldman Sachs and Bryan Garnier raised their recommendations on the stock following its release.

However, Elliott’s arrival has raised expectations of other, potentially radical changes.

Elliott has yet to outline its proposals for TIM, but sources said the fund wants it to be run as a true “public company” with the majority of board members independent.

The activist investor also plans to push for the conversion of TIM’s savings shares into ordinary ones that would help raise cash but which Vivendi blocked in late 2015, the people said, and seek a spin-off of the soon to be created network company.

But Vivendi on Wednesday criticised Elliott’s track record of waging campaigns elsewhere.

“Elliott Management repeatedly attacks states and companies ... and is known for its financial approach focused on short term gains, most probably leading in this case to dismantling TIM,” the spokesman said.

The activist investor declined to comment.

The fund has until Tuesday to propose amendments to the agenda for TIM’s annual shareholder meeting called for April 24.

$1 = 0.8084 euros Additional reporting by Stephen Jewkes Editing by Mark Potter

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