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UPDATE 1-Telecom Italia CEO job at stake in investor meet
March 9, 2011 / 7:42 PM / in 7 years

UPDATE 1-Telecom Italia CEO job at stake in investor meet

* Telco board, Mediobanca committee to meet on nominees

* Bernabe may retain CEO role or become chairman-reports

* Bernabe hailed for prudent cost cuts, avoiding fireworks (Adds Telco board meeting scheduled for Monday)

By Deepa Babington

ROME, March 9 (Reuters) - Speculation over whether Franco Bernabe will retain his job as chief executive of Telecom Italia, Italy’s biggest phone company, is growing ahead of meetings by controlling shareholders to draw up a new board.

Some analysts expect Bernabe, who has championed diligent cost-cutting and debt reduction over more headline-grabbing measures to turn around Telecom Italia, to stay on as CEO, but Italian media have reported he could be named executive chairman instead as major investors disagree on appointments.

“I view either (position for Bernabe) as a positive for investors as he is likely to continue to defend Telecom Italia from shareholder-unfriendly moves by the government, regulators, unions,” said Bernstein analyst Robin Bienenstock.

The process kicks off on Thursday when the nominations committee at Mediobanca meets to draw up its nominees for the board and the CEO role, a source close the matter said. The board of Telco, which controls Telecom Italia with a 22.45 percent stake, will then meet on Monday, March 14, to finalise the list, the source said.

The Telco investor pact is made up of Italian investors Generali (GASI.MI), Intesa Sanpaolo (ISP.MI) and Mediobanca (MDBI.MI) and Spanish phone giant Telefonica (TEF.MC).

Bernabe has often been attacked for bypassing radical initiatives to boost growth, but his fortunes have improved in recent weeks after the company’s 2010 profit beat forecasts and it promised to boost dividend payouts 15 percent annually.

Telecom Italia shares are up 18 percent this year, outperforming the FTSE Italia all-share index, which rose 7.6 percent in the same period. They hit a 52-week high of 1.16 euros last week. Strong growth at its Brazilian and Argentine units have also spurred investor confidence in the company.

Bernabe has also won the support of Asati, which represents smaller investors in Telecom Italia and has warned that new management could create “strong repercussions” for the company.

A new CEO could also result in a new strategy or changes in the company’s fibre-optic investment plans, Bienenstock said. Bernabe has won applause from analysts for fending off pressure from the Italian government and rival operators to invest more aggressively in a fibre-optic network.

Indeed, Bernabe has been on the defensive for much of his time since taking the helm in December 2007, resisting pressure to spin off the company’s fixed-line unit and taking flak from unions for his plans to cut jobs.

He has also attracted criticism for not doing more to spur growth at home.

Bernabe has steadfastly maintained, however, that a former monopoly like Telecom Italia, weighed down by 31.5 billion euros of debt and falling revenues on its home turf, needs to work on improving efficiency first.

“It’s true that in Italy, competition is strong and the pressure on prices is enormous,” he told L‘Espresso magazine. “But until the economy recovers, it is difficult to extract benefits from the home market. The only strategy possible is that of reducing costs, like we’ve been doing so far.” (Additional reporting by Stefano Rebaudo in Milan; Editing by Will Waterman and Steve Orlofsky)

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