March 28, 2019 / 8:01 AM / 7 months ago

RPT-UPDATE 2-Italy state lender seeks truce between Telecom Italia investors Vivendi and Elliott - sources

 (Repeats from Wednesday)
    * Italy's CDP in talks with Vivendi - sources
    * Compromise could include more balanced board make-up -
    * Elliott may be willing to find accord after AGM - source

    By Agnieszka Flak , Elvira Pollina and Stefano Bernabei
    MILAN/ROME, March 27 (Reuters) - Italy's state lender is
seeking to broker a truce between Telecom Italia's (TIM)
 two warring investors, France's Vivendi and
U.S. activist group Elliott, to end a boardroom battle that has
paralysed the group, sources said.
    Cassa Depositi e Prestiti (CDP), controlled by the treasury
and now TIM's second biggest investor behind Vivendi, is in
talks with the French group to iron out an agreement, two 
sources familiar with the discussions said.
    Vivendi and Elliott have been trading blows for more than a
year over how to revive Telecom Italia (TIM), the slumbering
telecoms heavyweight saddled with more than 25 billion euros
($28.12 billion) of debt.
    The next showdown will take place at a shareholder meeting
on Friday, where Vivendi's proposal for a board reshuffle to
reduce Elliott's influence is expected to be rejected. 
    CDP, which began investing in TIM last year to safeguard
Rome's interest in a company it sees as strategic, has recently
almost doubled its stake to just under 10 percent.
    "There are contacts between Vivendi and CDP and there are
signs of wanting to find common ground," one of the sources
said, adding details would be discussed after Friday's AGM.
    In an emailed statement, CDP denied that it was holding
talks with Vivendi or other TIM shareholders.
    Elliott was not currently involved in the talks, the people
added, although a separate source said the U.S. fund might be
open to finding some sort of accord after the AGM. 
    A truce between Vivendi and Elliott could speed up the
creation of a single network operator, a project backed by the
CDP but which is one of the main bones of contention between
Elliott and Vivendi. 
    Investors say the acrimonious bickering between Vivendi and
Elliott, which has cost TIM's shares a third of their value over
the last year, has done little to revive the former monopoly.
    They say that the two sides need to bury the hatchet and
allow management to push through measures to slash debt, tackle
competition and pursue strategic options to boost value.
    "This conflict has made it impossible for TIM's management
to implement any kind of strategy, defend its market share or
fight growing competition," said Emanuele Vizzini, general
manager at Milan-based investment fund Investitori Sgr. His fund
cut most of its TIM stake due to the governance battle.   
     TIM has underperformed bigger peers such as Deutsche
Telekom and Orange for years, is facing new
rivals in both broadband and mobile, and its Brazilian business
is only gradually recovering from economic malaise.
    Elliott wrested control of TIM's board last May after
blaming Vivendi for serving its own interests. It advocated for
a more radical shake-up of the telecoms group.
    The protracted boardroom battle led to the ousting in
November of CEO Amos Genish, a Vivendi ally who was replaced by
Luigi Gubitosi, who was appointed to the board by Elliott. 
    On Friday, Vivendi seeks to replace Chairman Fulvio Conti
and four other Elliott-backed directors, citing "substantial
lack of independence" and accusing them of conspiring to fire
    It will likely lose the vote, with three influential proxy
advisers urging shareholders to vote against the proposal.
    But with Vivendi owning nearly a quarter of TIM and able to
block many extraordinary measures, getting the French to play
ball is vital to get things done, sources said. 
     A possible compromise could include a more balanced board
make-up and a new chairman appointed by the CDP, sources said.
    Elliott controls two thirds of the 15-strong board.
    While the activist fund had been pushing for TIM to spin off
its network and merge it with smaller rival Open Fiber, Vivendi
has opposed TIM losing control of its biggest asset.
    CDP, which co-owns Open Fiber with utility Enel,
is keen to ensure that the project to create a single network
becomes a reality, also to avoid duplicating investments.
    Now that CDP's clout at TIM is growing, Vivendi can ill
afford to have strained relations with the state lender. 
    "Going against the CDP would mean going against the Italian
state ... that's different than just fighting Elliott," one of
the sources said. 
    ($1 = 0.8891 euros)

 (Additional reporting by Gwenaelle Barzic in Paris
Editing by Alexandra Hudson and Alexander Smith)
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