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Telecom Italia counters Elliott plan with new presentation

Telecom Italia (TIM) has rejected ‘activist investor’ Elliott Management’s plans to break up the company in a presentation to investors.

The move followed the TIM board’s publication of its industrial plan in March and hedge fund Elliott’s publication of a counter-plan in April. While Elliott said it supported TIM CEO Amos Genish’s business plan, it accused TIM’s largest shareholder Vivendi of benefiting from profits at the expense of other investors.

TIM restated its belief that its management plan was the “right way to address the industrial transformation of the company” by delivering sustainable growth in the long term and condemned Elliott’s proposal for what it described as “a radical reduction of the company’s current’ asset perimeter”. It highlighted Elliott’s plan to deconsolidate the TIM fixed network division, reduce TIM’s stake in wireless infrastructure arm Inwit and sell submarine cable unit Sparkle, along with a potential combination of TIM’s Brazilian unit with a local peer.

TIM said that in its view only the potential sale of Sparkle had any merit for consideration.

The company said that its plan to legally separate the fixed infrastructure arm while maintaining 100% ownership was “the most sensible action in the current context and regulator framework”, although it might consider selling a minority stake. It said there was no evidence that full separation would deliver additional value and that no other European telco had gone down this path. It said that Inwit had continued strategic relevance for the company in view of the evolution of 5G. TIM further argued that any consolidation of TIM Brazil with Oi, the most likely candidate, would expose it to potential short-term financial pressure because of the financial profile of Oi.

Elliott, in its March presentation, had argued that Vivendi had “focused on creating value for its shareholders rather than for TIM” and that the telco was trading at a discount that had increased threefold since Vivendi’s nominees joined TIM’s board, despite the fact that TIM’s capex in transforming its network had peaked in 2017.

Elliott said that Vivendi had attempted to “shift value” from TIM to itself by, for example, planning a joint venture between TIM and Canal+ and seeking to strike a content acquisition deal with Mediaset, as well as pushing through the award of an advertising mandate to Vivendi-controlled Havas.

Elliott said that Vivendi had also “demonstrated poor stewardship” of the company, had made “multiple missteps” with regulators and also accused Vivendi of having a “hidden agenda”.