Activist investor Elliott Management urged Telecom Italia to sell a stake in its fixed business and part – or all of – international wholesale unit Sparkle to reduce debt and increase returns, as it continues to crank-up pressure on the operator’s Vivendi-controlled board.
In the latest attack on the management of Telecom Italia, Elliott Management sent a letter to shareholders stating a plan to separate the operator’s fixed business into a new company called NetCo did not go far enough to address the issues facing the operator.
Rather than retaining the new company in its entirety, the investor said a minority stake should be sold through either a public listing or private sale. It added: “widening NetCo’s share register would create value for TIM shareholders and might hasten the creation of one single national network.”
UK-based investment company Elliott Management also wants a new board at the Italian operator to investigate the sale of international wholesale business Sparkle. The proceeds, it believes should then be used to reduce debt at Telecom Italia or reintroduce a shareholder dividend.
The investor said it aimed to “catalyse change” at the operator rather than gain a controlling share, adding well-documented governance issues resulted in investors being unable to trust Vivendi.
Vivendi hits back
In a statement released shortly after Elliott Management’s latest claims, Vivendi (the largest single shareholder of Telecom Italia with a stake of around 25 per cent) said it would examine the comments with “an open mind”, but added Elliot was “well-known for its short-termist initiatives”.
Vivendi also defended long-term plans unveiled last month, including the spin-off of its fixed business and digital cost-saving initiatives, stating the strategy was “strong and promising for the future”.
The move is Elliot Management’s latest attempt to challenge the dominance of Vivendi on Telecom Italia’s board and follows its nomination of six independent executives to replace existing members – including chairman Arnaud de Puyfontaine, who is also CEO of Vivendi.