Flavio Cattaneo Named CEO of Telecom Italia

MILAN—Telecom Italia SpA said Wednesday it has appointed Flavio Cattaneo, currently chief executive of train operator NTV SpA-Nuovo Trasporto Viaggiatori, as the new CEO of Italy's largest telecommunications operator.

Mr. Cattaneo will succeed Marco Patuano, who resigned earlier this month over clashes with Telecom Italia's board and its largest shareholder, France's Vivendi SA, which has built up a 24.9% stake in the Italian company.

The board's decision to appoint Mr. Cattaneo is a step toward a much-needed turnaround for Telecom Italia, according to a person familiar with the matter, after years of declining revenue and high debt.

The telecom operator has struggled with a lack of a clear strategic direction able to cope with the twin challenges of a protracted economic downturn in Italy and harsh competition that has sent prices spiraling downward in the domestic market, which accounts for most of the group's business.

According to the person familiar with the matter, the need for a turnaround became evident in recent months, as the board grew more and more disappointed with the former chief executive's approach.

Mr. Patuano—who had served as the company's chief executive since November 2013—was able to keep such tensions under control until recently. Clashes became more open after Vivendi gained four seats on Telecom Italia's board in December and started to exert a stronger influence in the boardroom.

The person familiar with the matter said the main sources of tension were poor financial results at Telecom Italia—which in 2015 turned in one of the worst performances in the European telecom sector—and the way regulatory issues were addressed.

According to Vivendi, the way the Italian company dealt with regulators and authorities was unacceptable: Telecom Italia was recently fined for unfair competition behavior, and regulators urged a change in the way the company dealt with regulatory issues.

Another person familiar with the matter has said Vivendi was pushing for stronger cost-cutting measures and to urge Telecom Italia to address its underperforming Brazilian unit.

Now, with a new CEO on board, one of the people familiar with the matter said the strategy outlined by Mr. Patuano in February will remain in place. The former CEO said then that the company would increase investments in the Italian network, totaling €12 billion ($13.55 billion) during the three-year period ending in 2018.

The new CEO is expected to work more closely with the company's chairman, Giuseppe Recchi, and will make strategic adjustments if needed, one of the people familiar with the matter said.

Mr. Recchi is expected to have more powers than he did previously. These include a stronger control of network-security issues, as requested by the Italian government, a person familiar with the matter said. The network is viewed as a sensitive asset, this person said, because of the information it carries.

One of the people familiar with the matter said Mr. Cattaneo, 52 years old, was chosen by Mr. Recchi, who spent the past week trying to persuade him to take the role. This person said Mr. Cattaneo said was selected for his experience at media companies and because he has worked at companies that are subject to regulatory issues, such as Terna, an electricity operator. This person added that Mr. Cattaneo demonstrated the ability to around a business quickly during his tenure as chief executive of NTV, the train operator.

In 2015, Telecom Italia posted a net loss of €72 million ($81.3 million) amid nonrecurring charges. Revenue fell 8.6% from a year earlier to €19.7 billion, while earnings before interest, taxes, depreciation and amortization fell 20%. Domestic Ebitda, nearly 80% of the total, also declined 20%.

Write to Manuela Mesco at [e-mail]

(END) Dow Jones Newswires

March 30, 2016 16:15 ET (20:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.