Some of Italy’s most highly prized wines defy cultural norms by combining Italian soil and French grapes with an American taste for boldness. Telecom Italia has all that too. France’s Vivendi, America’s Elliott Management and the Italian government all compete for influence over the telephone company. Given another restructuring plan announced on Wednesday, under yet another new chief executive, Amos Genish, shareholders might well need a drink.
Mr Genish delivered the latest plan in an attempt to revive the spirit of the moribund Telecom Italia. Freighted with net debt roughly thrice its earnings before interest, tax, depreciation and amortisation, the telco has struggled valiantly to meet its targets on increasing penetration of ultrafast broadband. French shareholder Vincent Bolloré has used his media company Vivendi, which holds just 24 per cent of voting shares, to push for improved profitability. He has installed his man Arnaud de Puyfontaine as executive chairman, who in turn oversees Mr Genish.
Good luck to him. He has to contend with a highly competitive domestic mobile market where new entrant Iliad (also French) will take the number of big competitors to four. Mr Genish has decided to assuage any tension with the Italian regulator by agreeing to separate TI’s fixed line network, much as BT Group did with Openreach. Everyone knows where appeasing the regulator got BT.
Even so, Mr Genish plans to cut investment to save cash. Hitting the regulator’s target of reaching a fifth of homes with fibre, double last year, would then be tough, thinks Moody’s. The new chief must also address a low revenue per user (mobile and fixed) at €50. Spain’s Telefónica is at €90.
Finally, Paul Singer’s Elliott Management has taken a stake. Elliott complains about Telecom Italia’s — read Mr Bollore’s — corporate governance. The fund wants wholesale changes to the board, on to which Vivendi placed three members last year. Elliott also complains of sweetheart deals made between Vivendi and Telecom Italia that benefit the former. One example: a Vivendi appointee runs procurement at the Italian group.
All shareholders would love this Milanese to be priced like a classy Super Tuscan. That will not happen soon. But assuming Elliott can win over investors, and the regulator, there is some hope for that.
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