Vivendi Seeks Italy Dominance With Telecom Italia CEO Ouster

  • Chairman Bollore looking to create dominant Italy media player
  • Content deal with Mediaset seen as key priority for Vivendi

French billionaire Vincent Bollore has spent almost two years arranging the chess pieces for an aggressive push into Italy’s media and telecommunications market. On Monday, he made his move.

By triggering the ouster of Telecom Italia SpA Chief Executive Officer Marco Patuano, Bollore showed his determination to make Vivendi SA, which he chairs, a dominant force in Italy, according to people familiar with the situation. The French firm first built up a stake of almost 25 percent in Italy’s former phone monopoly.

The management shakeup is an early step in Bollore’s plan to create a southern European conglomerate focused on exclusive TV content that can keep pace with competitors like Netflix Inc. and challenge Rupert Murdoch’s Sky Plc, the people said, asking not to be identified discussing a private matter. Patuano, 51, stepped down Monday.

“Bollore is a consolidator, and his final goal is building an integrated chain of entertainment, telecommunications and music able to rival Hollywood’s giants from cities like Paris, Rome and Milan,” said Giacomo Vaciago, an economics professor at Milan’s Cattolica del Sacro Cuore University.

Television Tie-Up?

A deeper relationship with Mediaset SpA, the broadcaster founded by former Italian prime minister Silvio Berlusconi, may follow, the people said. Closer cooperation could allow the combination of Mediaset’s offerings with those of Canal Plus, Vivendi’s pay-television and production arm. The two companies are in talks on a share swap as well as a large investment by Vivendi in the Mediaset Premium pay-TV unit, people familiar with those discussions said.

"We can expect a few things to happen now. One is more cooperation between Telecom Italia and Vivendi in the media space,” said Stephane Beyazian, an analyst at Raymond James in London. “Two, Bollore may want to step up the pace of cost-cutting at Telecom Italia, which hasn’t been particularly rapid so far."

A spokesman for Vivendi declined to comment on the company’s strategy in Italy. Telecom Italia officials weren’t immediately available for comment.

Bollore’s vision represents another identity for Vivendi, a water utility turned global media group that’s changed its shape repeatedly through hundreds of acquisitions and asset sales since the late 1990s. While former CEOs Jean-Marie Messier and Jean-Bernard Levy sought deals in the U.S. and emerging markets, Bollore is more focused on Europe and particularly Italy, where he owns a stake in Mediobanca SpA and used to be vice-chairman of insurer Assicurazioni Generali SpA.

Petit Prince

A shipping and agricultural tycoon and comic-book buff nicknamed "le Petit Prince du cash flow" by French media for his obsession with financial targets, Bollore inserted himself into a volatile situation at Vivendi in 2012. As a boardroom conflict over strategy spilled onto the front pages and led to the removal of Levy as CEO, he began amassing a stake in Vivendi before eventually being named chairman in mid-2014. His holding company currently owns about 14 percent.

Since Levy’s departure, Vivendi has largely dismantled the collection of assets he built and bought, selling SFR, France’s second-largest mobile operator, as well as an African telecoms unit and Activision Blizzard Inc., the Los Angeles-based video-game studio behind “Call of Duty.” Investors are so far withholding judgment on that strategy; Vivendi’s stock is down about 2 percent since Bollore became chairman. Last year, the firm agreed to boost its dividend after criticism from P Schoenfeld Asset Management, a U.S. hedge fund.

Brazil Unit

Vivendi’s involvement in Telecom Italia began soon after Bollore entered the executive suite, when it received an 8 percent stake in the carrier as part of a deal to sell GVT, a Brazilian telecoms business. Since then, Vivendi has steadily increased its shareholding and Bollore and his lieutenants have taken an ever greater role in the operations of the Italian firm, the people familiar with the matter said. Four directors proposed by Vivendi have joined its board, including CEO Arnaud de Puyfontaine.

Bollore’s camp is open to a sale of Telecom Italia’s TIM Participacoes SA unit in Brazil, traditionally seen as a golden goose, although political turmoil and economic stagnation in Latin America’s most populous country make that unlikely for now, the people said. An effort to merge the division with competitor Oi SA, backed by investor Mikhail Fridman, collapsed last month, with the Russian billionaire blaming resistance from TIM.

In choosing a replacement for Patuano, Bollore, 63, is trying to balance his own preferences for a clean break with those of Italian prime minister Matteo Renzi’s government, which is keen to ensure Telecom Italia upgrades infrastructure while remaining firmly under local control.

Among candidates being strongly considered, according to people with knowledge of the deliberations, are Flavio Cattaneo, who runs rail operator Nuovo Trasporto Viaggiatori SpA and sits on the boards of Generali and Telecom Italia, and Luigi Gubitosi, the former head of mobile operator Wind.

More Deals?

Both men are also former executives at public broadcaster RAI, giving them experience with content production -- Bollore’s declared priority for Vivendi and its assets. That could come in handy if Telecom Italia cooperates more closely with Mediaset, which also has a large operation in Spain. The new chief’s identity may be announced after Telecom Italia’s next board meeting, planned for April 12 in Venice, one of the people said.

Bollore’s habits at Vivendi may give further clues to his plans. He’s much more closely involved with Canal Plus than in Vivendi’s other major remaining media asset, Universal Music Group, according to a person familiar with company operations. There’s an “urgent need” to turn around losses at the pay-TV operation, De Puyfontaine said in February.

Some of Bollore’s moves have puzzled analysts, such as his attempt at a hostile takeover of video-game producer GameLoft SE, which has just 6 percent of the annual revenue of Activision. Still, Vivendi’s asset sales have allowed it to amass more than 9 billion euros ($10.1 billion) in cash and equivalents, ample firepower for further deals.

"In the long term, they may envision the creation of a European pay-TV powerhouse, based on Canal Plus and Mediaset Premium,” said Beyazian. “But France and Italy doesn’t make it European. Bollore will need more assets in other countries."

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