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TIM announces Elliott-proposed board member Gubitosi as new CEO

Luigi_Gubitosi

As anticipated by Telecoms.com last week, Telecom Italia (TIM) has appointed current board member Luigi Gubitosi as its new CEO.

Gubitosi has been given the gig less than a week after the former CEO Amos Genish was unceremoniously shown the door, having been reassured his job was safe. His replacement is a member of the TIM board nominated by Elliott, the activist investor group that wrested control of the TIM boardroom from Vivendi. Genish was a Vivendi appointee and remains on the board.

This is just the latest chapter in the battle for control of TIM with a view to extracting value from it. Last year we asked how Vivendi, with less than a quarter of TIM shares, could apparently dictate the direction of the company. Elliott clearly felt the same and successfully challenged Vivendi. But now, with less than a tenth of TIM stock, it’s trying the same move.

You don’t have to be the biggest cynic in the world to figure both parties are in it for themselves. The biggest apparent difference between their competing visions is a matter of short-termism. The rhetoric coming from the Vivendi camp is that it’s interested in the long-term health of the company, while Elliot is effectively engaged in asset-stripping in order to give it a more immediate return and exit on its investment.

The main manifestation of this is the plan to spin off TIMs network holdings into a separate company, imaginatively called Netco, that would still be wholly-owned by TIM. This feels like a cosmetic change but it would apparently free up some value, for some reason, perhaps by saddling it with loads of debt. The longer-term danger is that this would be a precursor to disposing of those assets entirely in the long term.

Genish is not a fan of this approach, and recently offered the following statement: “Any decision to break up the company, including losing control of the fixed network, must go back to the shareholders for a vote.” He will apparently seek shareholder support for an extraordinary shareholder meeting to address this, which shouldn’t be a problem if Vivendi is still backing him, but it’s not yet clear whether this will amount to an attempt to regain control of the board.

Elliot affiliation aside, Gubitosi looks pretty well qualified for the gig. He did a couple of decades at Fiat before joining MNO Wind, where he was CEO between 2007-2011. He moved on to be General Manager of state broadcaster RAI and, like any self-respecting member of the elite, is on a bunch of boards, committees and that sort of thing. His rich history of working with the Italian state might come in handy in the network spinoff process.

It’s very unlikely that Vivendi and other shareholders will take this further power grab by Elliott lying down, so this story is likely to keep giving for a while yet. Both parties will spout rhetoric about how invested they are in the future prosperity of TIM, but they only differ in their value-extraction strategies. In the meantime TIM remains hamstrung at a time when new entrant Iliad Italy is taking massive chunks of mobile subscriber share. It’s hard to see how that’s going to benefit anyone with a stake in TIM.


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