January 24, 2018 / 9:37 AM / in 4 months

Telecom Italia's denial of CEO exit rumors fails to quell talk of tensions with Vivendi

MILAN (Reuters) - Telecom Italia (TIM) (TLIT.MI) denied a report suggesting its recently appointed chief executive could be on the way out although several sources said there were growing tensions between him and the phone group’s top investor Vivendi.

FILE PHOTO: Telecom Italia logo is seen at the headquarters in Milan, Italy, May 25, 2016. REUTERS/Stefano Rellandini/File Photo/File Photo

TIM named Amos Genish, a favorite of Vivendi (VIV.PA) Chairman Vincent Bollore, as CEO at the end of September, making the former Israeli army captain the Italian phone company’s third chief executive in less than two years.

His two predecessors left the group over disagreements with France’s Vivendi, TIM’s biggest shareholder with 24 percent.

TIM Chairman Arnaud de Puyfontaine, who is also the chief executive of Vivendi, said in an emailed statement the board had “full trust in Amos Genish, whose strategy and vision we share. We are very satisfied with the progress made so far”.

In the same statement, Genish said he was “100 percent committed to the re-launch of TIM and to the fine-tuning of the industrial plan to 2020, which represents a long-term personal and professional project”.

Vivendi formally denied the speculation about Genish after daily Il Sole 24 Ore mentioned rumors he could be leaving.

However, several sources close to TIM said there were “heavy disagreements” between Genish, a known telecoms dealmaker, and Vivendi.

“The feeling between Genish and Vivendi is no longer good. Vivendi doesn’t want to give autonomy to its managers and Genish is alone in a very difficult company,” one source said.

“It looks like a lot of people are leaving the company and it is difficult to find high-standing replacements.”

The person added, however, that Vivendi was trying to keep Genish in the job for now to avoid “reputational damage”.

Another person said Genish had found TIM, a heavily indebted former state phone monopoly, a “much bigger mess than he had expected”.

STRATEGIC ASSETS

Since taking over, Genish has sought to patch up relations with Rome, which considers some of the company’s assets strategic. These relations had become particularly strained when Vivendi became TIM’s biggest investor.

Italian Industry Minister Carlo Calenda said on Wednesday he had not heard anything about a possible departure of the CEO.

After meeting Genish several times last year, Calenda repeatedly said he expected a more constructive and productive phase of relations with TIM under the new boss.

Genish and Vivendi go back a long way: Genish sold Brazilian telecoms start-up GVT to Vivendi in 2009 and five years later convinced Bolloré to sell it on to Telefonica, making a capital gain of $4 billion for the French media group.

Before joining TIM, Genish led an effort to converge Vivendi’s content, platform and media distribution strategies.

Genish took over as TIM fights battles on several fronts: Its fixed-line business is losing value, new competitors are appearing in both broadband and mobile and its only foreign business, Brazil, is still recovering from economic malaise.

Genish’s predecessor had launched a drive to cut costs, boost profitability and make TIM a more nimble competitor.

Still, Genish inherited a company saddled with 26 billion euros ($32 billion) of debt, while the imminent arrival of low-cost French mobile operator Iliad (ILD.PA) is likely to squeeze margins. Rival investments in broadband infrastructure by power firm Enel (ENEI.MI) are undermining TIM’s broadband drive.

Genish’s appointment left some investors guessing what is Vivendi’s ultimate aim for the company: Use it as a pillar of its plan to create a southern European media empire or as an asset to trade in the next wave of European telecoms mergers.

Telecom Italia shares were down 0.6 percent by 1305 GMT while Vivendi shares were down 1.1 percent.

    Additional reporting by Stephen Jewkes in MILAN, Alberto Sisto and Massimiliano di Giorgio in ROME, Gwenaelle Barzic in PARIS, writing by Agnieszka Flak; Editing by Adrian Croft

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