By Danilo Masoni
MILAN Dec 19 Telecom Italia's
shareholders meet on Friday to decide whether to oust the entire
board in an attempt by dissident investors to weaken the
increasingly powerful influence of rival Spanish group
The potentially disruptive decision comes as Telecom Italia
struggles to revive years of sluggish growth and Chief Executive
Marco Patuano has to move ahead with asset sales to help cut
debt of more than 28 billion euros ($39 billion).
The rebel investors led by businessman Marco Fossati fear
that without their intervention the company will rush into a
sale below full price of its Brazilian mobile business TIM
Participacoes, a smaller rival to Telefonica's Vivo
They have also criticised Telecom Italia's recent issue of a
1.3 billion euro convertible bond, contending that they were
excluded from the dilutive deal, as well as the recent sale of
its 22.7 percent key stake in Telecom Argentina for
If the activist campaign fails, Telecom Italia will continue
with a strategy outlined last month by Patuano for asset sales
to fix its balance sheet and fund much-needed investments in its
ageing domestic network.
Friday's vote pits Fossati, Telecom Italia's third-biggest
shareholder with a 5 percent stake, against Telco, the
investment vehicle owned by Telefonica and a group of Italian
financial institutions that managed with its 22.4 percent stake
to appoint the majority of the current board.
Fossati initially appeared to have little chance of success
but backing from two groups who advise institutional investors
on which way to vote at such meetings, MSCI's ISS and
Glass Lewis, has made the outcome of the vote more uncertain.
So far more than 53 percent of Telecom Italia investors have
registered for the meeting, meaning Telco will need the backing
of other investors to fend off the board removal.
To go through, the proposal needs a majority of 50 percent
plus one vote of shareholders at the meeting.
U.S. money manager BlackRock has raised its stake in
Telecom Italia to around 10 percent, making it the second
largest investor in the company with a potentially pivotal role
in the vote, but has not disclosed its intentions.
"We're closer to victory than we could have imagined,"
Fossati told Italy daily Corriere della Sera this week. "But
even if the board is not removed, simply having most of the
funds on our side will be a strong signal."
Telefonica, Europe's largest phone company, has 66 percent
of Telco and recently secured an option to gradually take over
the stakes of its partners Assicurazioni Generali,
Intesa Sanpaolo and Mediobanca from 2014.
As a direct result of that deal Brazil's anti-trust watchdog
has told Telefonica to either sell its indirect interest in TIM
Participacoes, which has a market value of nearly $12 billion
and is 67 percent owned by Telecom Italia, or seek a new partner
for its own $20 billion local business, Vivo.
Telefonica's goal, according to sources familiar with its
plans, is break up TIM Participacoes and divide its assets and
network up among Vivo and the other two mobile operators in
Brazil, America Movil and Oi.
Several sources familiar with the matter said on Wednesday
that Telefonica would get 18 months to reach a solution.