Telecom Italia Confirms CEO to Quit -- Update

By Giovanni Legorano 

MILAN-- Telecom Italia SpA is set to part company with Chief Executive Marco Patuano after clashes over strategy with Vivendi SA, the French media and entertainment group, which has taken a near 25% stake in the Italian operator.

Telecom Italia confirmed on Monday that it is in advanced talks with Mr. Patuano, 51, over the terms of his departure after reports at the weekend that he was about to quit. He has been with the company for 25 years and has been chief executive since November 2013.

The boardroom bust-up follows Vivendi's growing influence at Telecom Italia. Shareholders in the former Italian telecom monopoly approved the appointment of four Vivendi directors last December after the French company acquired around a fifth of the Italian group's stock.

Vivendi has continued to increase its stake to just short of the threshold which would trigger a full takeover offer, showing its determination to return to the telecom sector after the sale of its domestic telecom assets in 2014 to Numéricable, a French cable operator.

Vivendi said it had increased its stake to 24.9% early this month around the time of a March 2 meeting between Mr. Patuano and Vivendi's senior management in Paris. Vivendi's chairman is Vincent Bolloré, one of France's most prominent businessmen.

Vivendi has put pressure on Mr. Patuano to be more aggressive about cutting costs, according to people familiar with the situation, as Telecom Italia embarks on a EUR12 billion ($13.6 billion) three-year investment program to upgrade its network and distribute more content such as music, video and mobile games in Italy.

Telecom Italia's new spending plan follows a string of disappointing results.

Earnings before interest, taxes, depreciation and amortization fell 20% in 2015 to EUR7 billion from the previous year on a 8.6% drop in revenue to EUR19.7 billion. Net debt widened to EUR27 billion at Dec. 31 compared with EUR25.8 billion at the end of 2014, raising concerns among analysts about how the company will pay for the investment plan.

Another bone of contention for Vivendi, the owner of music company Universal Music and French pay-TV company Canal Plus, is the future of its Brazil unit, according to the people familiar with the matter. TIM Participações SA, as the Brazilian business is known, has been at the center of takeover speculation for some time. Mr. Patuano signaled last year that merging the mobile operator with local rival Oi SA might be an option.

Mr. Patuano wasn't immediately reachable for comment on Monday.

Telecom Italia's other major shareholder is Xavier Niel, another French business tycoon and founder of Iliad SA, the French broadband and mobile telecom operator.

Write to Giovanni Legorano at [e-mail]

(END) Dow Jones Newswires

March 21, 2016 08:13 ET (12:13 GMT)

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