Telecom Italia CEO Risks Ouster on Strategy Clash

(Bloomberg) -- The open conflict between two warring investors in Telecom Italia SpA is finally catching up with Chief Executive Officer Amos Genish.

Genish’s job is now at risk because company directors representing Elliott Management Corp. are impatient with his lack of progress in turning around the former phone monopoly, according to people familiar with the matter.

While the U.S. activist investor wants Telecom Italia to make changes like selling a stake in its towers company and a full spinoff of the phone network, Genish has been resistant, instead focusing on a strategy of organic growth, said the people, who asked not to be identified as the deliberations are private.

The 57-year-old Israeli former army captain has walked a tight rope for months between Vivendi SA, the carrier’s largest shareholder that brought him in almost a year ago as CEO, and the U.S. hedge fund. He was put in an awkward position in May when Elliott took board control of Telecom Italia from Vivendi, in a push for improve corporate governance and asset sales that was supported by other shareholders.

A representative for Elliott declined to comment. Telecom Italia Chairman Fulvio Conti rejected “the absurd and unfounded accusations,” issued by Vivendi on the company’s operations.

Share Underperformance

Vivendi, in a statement late Wednesday, said it’s “deeply concerned by the disastrous management of Telecom Italia since Elliott took control” of the board in May, calling the market performance since then “dramatic.”

Telecom Italia is the second-worst performing stock in Europe’s Stoxx 600 Telecommunications index over the past two years after BT Group Plc, which fired its CEO in June.

The Italian company’s shares had climbed after Bloomberg News first reported Elliott’s involvement in the stock in March but have steadily fallen since the fund’s board victory.

Shares of the carrier extended declines on Wednesday to close down 1.5 percent at 51.7 cents in Milan. They’re sitting at the lowest since August 2013, down 39 percent since Elliott won control of the board and 35 percent since Genish became CEO last September.

Genish has been struggling to reign in Telecom Italia’s mountain of debt and high costs and is up against new rivals in both the fixed and wireless businesses in Italy, including a new discount mobile offering from Iliad SA. Uncertainty about the company’s direction, with the battling investors, has also weighed on Telecom Italia’s stock.

In a statement on Tuesday, Telecom Italia said that Genish had bought 1 million of the phone carrier’s shares at 52.34 cents each.

The French media company holds 24 percent of Telecom Italia shares but only five spots on the board, versus Elliott’s roughly 9 percent stake and 10 directors.

While Elliott publicly backed Genish after the board coup and he was confirmed as CEO, simmering tensions became evident in subsequent weeks. In late June, Genish took the unusual step of criticizing unidentified directors for feeding what he called “untrue and unreliable speculation, interfering with management’s day-to-day work,” at a briefing with journalists.

Genish was then summoned to a board meeting to explain the frank comments and the board reaffirmed its support for the CEO after he said he regretted making them.

Industrial Investor

Vivendi is more focused on winning back control of the Telecom Italia board and re-establishing itself as an industrial investor than on protecting Genish’s job, said two of the people. Vivendi CEO Arnaud de Puyfontaine is working to improve relationships with the Italian government, including through a planned meeting with Italian Premier Giuseppe Conte and Economic Development Minister Luigi Di Maio in Bari, Italy, on Saturday.

Genish is due to face directors next Monday. While the conference call meeting was scheduled to discuss bidding in Italy’s auction of airwaves set aside for fifth-generation mobile networks, it gives Elliott-backed directors an opportunity to confront Genish on the company’s strategy and the stock performance.

©2018 Bloomberg L.P.