The management of Telecom Italia (TIM) has followed leading shareholder Vivendi in defending its strategy against proposed changes by activist fund Elliott, describing the latter’s “break-up plan” as premature and unfeasible. In a presentation to investors seen by Reuters, TIM’s management said it had evaluated all the actions proposed by Elliott, but decided they were incompatible with the business plan unveiled last month by CEO Amos Genish and “would carry material financial and execution implications” in the current context and regulatory environment.
Elliott holds around 9 percent of TIM’s ordinary shares and has proposed to replace six Vivendi-nominated board members at TIM’s upcoming AGM to be held on 24 April. Other proposals include selling a majority stake in TIM’s soon to be separated fixed network (NetCo), merging TIM’s Brazilian business with a local peer and reducing its stake in tower unit Inwit. TIM’s management said such proposals would only serve to make the group more vulnerable in the face of other large and diversified players.
In Brazil, a combination with a local operator such as Oi could increase the short-term financial pressure on TIM, given Oi's financial profile, and would therefore jeopardize the success of the strategic plan, the company said. This would change "drastically" the profile of cash generation from the Brazilian subsidiary.
Vivendi recently reiterated that it had a long-term strategy for TIM and provided “stability and expertise” as opposed to the “quick fixes” offered by Elliott. The activist fund previously railed against the “poor stewardship” of the Vivendi-controlled board, resulting in “deeply troubling corporate governance issues, a valuation discount and no clear strategic path forward”.
