Vivendi Is Said to Consider Triumvirate to Run Telecom Italia

  • Recchi could see power increased, Genish may run operations
  • Vivendi CEO to meet Cattaneo as soon as today on dispute

Vivendi SA is considering using its board clout at Telecom Italia SpA to install a trio of executives to manage the phone company if it can’t resolve differences with Chief Executive Officer Flavio Cattaneo, according to people familiar with the matter.

Under the plan, Vivendi Chief Convergence Officer Amos Genish would oversee Italy’s largest carrier on the operating side, while Telecom Italia Deputy Chairman Giuseppe Recchi would see his powers increased, with a focus on relationships with Italian regulators, said the people, who asked not to be named because talks are private. Both would work with Telecom Italia Executive Chairman Arnaud de Puyfontaine, who is also Vivendi’s CEO, they said.

The French media company led by Chairman Vincent Bollore has taken a more active role in managing Telecom Italia since gaining a majority of board seats earlier this year -- despite owning only a 24 percent stake -- and naming De Puyfontaine chairman. Vivendi’s growing influence has been met with resistance from Cattaneo, and the relationship has frayed. Vivendi executives are also concerned his combative style has damaged relations with the government at a time when the phone carrier is seeking to win broadband contracts in rural communities.

Vivendi, which is Telecom Italia’s largest shareholder, controls 10 of the 15 board seats. Executives there, who are trying to put together a dominant media group in Southern Europe, have become frustrated with a CEO who sometimes bucks instructions from Paris. Cattaneo also hasn’t succeeded in boosting Telecom Italia stock. It’s dropped 16 percent during his tenure, though he has overseen domestic cost-cutting and wrung more revenue from broadband investments.

Governance Change

While Cattaneo could still reach agreement to continue to stay on as CEO, his comments on the matter Tuesday -- denying any tensions and stressing his independence -- served to further anger Vivendi executives, according to the people. Bloomberg News reported on Friday that Cattaneo was negotiating a possible exit after his dispute with Vivendi escalated.

Vivendi may change the governance of the Italian company to avoid having too much power given to a single executive, though management structure is still being evaluated, the people said. While a deadline to resolve the issue has been set by the end of this week, De Puyfontaine was going to Rome as early as Tuesday to discuss the situation with Cattaneo, one of the people said.

Representatives for Vivendi and Telecom Italia declined to comment. Cattaneo didn’t immediately respond to a request for comment placed through Telecom Italia.

The conflict with Cattaneo is another distraction for Vivendi, which is already battling with former Prime minister Silvio Berlusconi’s family over the control of broadcaster Mediaset SpA.

Cattaneo, a media-industry veteran, was hired in March 2016 with Vivendi’s support and a mission to revitalize the former monopoly. His aggressive cost-cutting style has created tensions inside the company, with hundreds of managers moved to Rome from Milan and Turin, one of the people said.

In the last few weeks, Cattaneo and Telecom Italia clashed with the Italian government over telecommunications coverage in rural areas. The government engaged Open Fiber, a joint venture between Italy’s state lender CDP and Enel SpA, to build a new national fiber network. Cattaneo, 54, may leave Telecom Italia after reporting first-half results on July 27, two of the people said.

While Recchi may have the Italian title of “amministratore delegato,” which translates as chief executive in English, Genish would be the effective day-to-day manager running the business, two of the people said. Appointing Genish, a Brazilian, as general manager would be less politically problematic than naming him CEO, they said. Genish has a successful track record, most recently as CEO of Telefonica SA’s Brazilian unit. Before that, he was co-founder and head of GVT Holding SA, a Brazilian telecommunications company that was controlled by Vivendi for a time.

Cattaneo’s contract calls for him to get about 40 million euros ($45.6 million) in shares and cash if he leaves the company while it’s on track to beat its 2018 financial targets, according to a “special award” clause he arranged when he was hired. The bonus is linked to targets for boosting operating profit and cutting expenses and debt.

Telecom Italia rose as much as 2.4 percent to 81 cents on Tuesday after Cattaneo, speaking at an event in Rome, denied any tension with Vivendi and said he planned to stay until his contract expires in 2020. The stock later fell as much as 0.8 percent to 78.5 cents after Bloomberg reported that Vivendi is considering a new management structure.

"I am fine at Telecom and I don’t have any tension with either shareholders, the board or the chairman," Cattaneo said in comments confirmed by the company. “I’ve always acted in the best interest of the company and of all its shareholders granting independence and respecting all corporate and Italian laws."

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