AT&T reportedly considering TV U-turn

A report is suggesting AT&T is mulling over the prospect of selling its DirecTV assets as pressure mounts on the management team.

With the Elliott Management vultures circling overhead and an investor lawsuit hitting the New York District Court, AT&T is reportedly considering its options. Wall Street Journal sources are suggesting a divestment could be on the cards, a humbling move for AT&T executives who are seeing their diversification strategy crumble before their very eyes.

Although the sale of DirecTV is still a slim possibility, some executives might believe this is the best way in which to save their jobs. To demonstrate the scale of this potential outcome, cast your mind back to May 2018, a critical point during the AT&T defence of its Time Warner acquisition.

While the Department of Justice was looking for means to block the acquisition, for a brief moment, a concession was offered to the team; divest DirecTV assets and we’ll OK the Time Warner deal. This was almost immediately shot down by CEO Randall Stephenson, the purpose of Time Warner was to bolster the DirecTV offering.

This is the conundrum which the executive team is facing. The long-term business plan is sound; a purchase of an excellent content creation business to marry the delivery platform could create a notable share of the entertainment segment. However, the short-term threats might well force the team into a re-think.

Last week, a coalition of investors filed a lawsuit, naming a series of AT&T executives as defendants, accusing the telco of misleading executives over the performance of DirecTV. As the success of the DirecTV acquisition was being used to justify the Time Warner acquisition, the investors seemingly feeling violated, believing the gains were exaggerated or at least the longevity of the gains.

Perhaps more worryingly however was the emergence of Elliott Management. This vulture fund specialises in seeking undervalued businesses and introducing radical changes to increase dividends and share price. More often that not, when Elliott Management gets its claws into a business, executives usually find themselves heading towards the exit and a major restructure of the strategy is put in place.

If the sources are to be believed, this might well be a move towards appeasing the criticism before the HR department starts drafting emails.

What is worth noting, is this might well turn into nothing. Rumours of this magnitude might well be true, but the idea of discussing a divestment and then actioning these ambitions are two very different points of consideration. One question which remains unanswered is who would buy the assets?

AT&T is not going to be selling the business for pennies on the pound, therefore the potential purchaser will have to have a considerable bank account. It is also less clear whether this is a complete divestment or just the satellite assets. If it is just the ‘traditional’ content business, with the streaming side attached, this looks much less attractive to a potential investor.

One option could be a sale to Dish, a rival satellite TV provider. A merger of the two entities has been quashed by competition authorities in the past, though as there is now much larger variety of content options for the consumer it might be a possibility. That said, considering Dish is working through the $5 billion acquisition of the Boost prepaid mobile brand, it might not have the appetite for another large transaction.

Although this is a move which many AT&T executives will struggle to stomach, perhaps survival instincts have kicked-in.

The acquisition of DirecTV and Time Warner was supposed to be a means of diversifying the business, chasing the ever-increasing dollars which are being spent on digital entertainment by consumers and digital advertising by corporates. This was supposed to be a move to future-proof the business and drive growth opportunities.

Without DirecTV, the entertainment unit looks quite hollow. The AT&T business will look much more like a traditional telco, one which is built around the decreasingly profitable and increasingly commoditised business of connectivity. Many companies are looking to leverage their relationship with customers with additional services, and for AT&T, this was supposed to be video.

What is worth noting, is the divestment looks unlikely at the moment. It might happen, but it might well be more sensible for a spin-off and partial divestment. This would recover funds, partially satisfying the vultures at Elliott Management, while also keeping some skin in the game. It would also allow for the appointment of a new management team, perhaps one which is more aligned with content as opposed to the current set-up which is primarily focused on telco.

However, the ability of Elliott Management to cause chaos in a business when it has outlined its intentions should not be underestimated. This is a firm which has a track-record in getting its own way and raising support from other investors. Above all else, the AT&T management team should be very concerned about their future at the telco.

Elliot set to challenge AT&T leadership over media strategy – report

The apparent anointing of John Stankey as the next AT&T CEO is reportedly what prompted Elliott to announce its activist intentions.

Right now this insight comes courtesy of the WSJ alone, which has chatted to some people who think they know what they’re talking about. The report says AT&T Randall Stephenson plans to call it a day soon and has been grooming his mate John Stankey to take over. Stankey was recently promoted the specially-created role of COO, which would be easy to view as a stepping stone to CEO, especially since most of the company now seems to report directly to the COO.

Shortly after activist investor firm Elliott Management announced it had acquired a significant shareholding in AT&T and intended to use that position to pressure the AT&T management into making changes that it reckons will significantly boost the share price. That is the ultimate aim of activist investors like Elliott, which are sometimes referred to as vulture funds.

The WSJ piece mainly seeks to flesh out Elliot’s objectives. It claims the closed, cronyish succession plan is what provoked Elliott into breaking cover and going public with its concerns. The continued promotion of Stankey is considered to be symptomatic of a botched approach to AT&T’s strategy of diversifying towards media, as he has been put in charge of it all, rather than leaving it to the media experts already in place at the acquired companies.

Elliott has rich form in messing with the grand plans or corporate execs, having recently succeeded in preventing Vivendi from controlling Italian operator group TIM while only owning a quarter of it. AT&T is an order of magnitude larger but the same principles apply. If Elliott can convince other AT&T shareholders that its plans for the company will give them a better return than those of Stephenson and Stankey then it could initiate a proxy battle for control of the company.

The handling of the DirecTV acquisition seems to be especially derided by Elliott, which seems to think AT&T should cut its losses and flog it. But its complaints don’t seem to stop there, with Stankey’s control of WarnerMedia apparently a source of grievance too. A lot rests on AT&T’s imminent SVOD service, HBO Max, which will have to succeed in a very competitive market to reassure its investors.

Elliott’s vultures are circling AT&T

Activist investor Elliott Management has set its eyes on AT&T, suggesting the firm is bloated and undervalued, with ambitions to cut staff, clear out the leadership team and sell-off non-core assets.

In a letter sent to AT&T investors, Partner Jesse Cohn and Associate Portfolio Manager Marc Steinberg have attacked the firm and suggested a drastic turnaround strategy which includes divestments, retail location closures, job cuts and a change in mentality. It does appear shareholders are intrigued by the idea, with share price increasing 6% in pre-market trading.

“The purpose of today’s letter is to share our thoughts on how AT&T can improve its business and realize a historic increase in value for its shareholders,” the letter states.

“Elliott believes that through readily achievable initiatives – increased strategic focus, improved operational efficiency, a formal capital allocation framework, and enhanced leadership and oversight – AT&T can achieve $60+ per share of value by the end of 2021. This represents 65%+ upside to today’s share price – a rare opportunity for any company, let alone one of the world’s largest.”

For those who aren’t familiar with Elliott Management, this is not necessarily a move which is out of character.

Known as a ‘vulture fund’, the team search for businesses which it deems are undervalued and effectively enter to cause chaos. More often than not, the team suggests a complete overhaul of senior managers and a new strategy. This strategy often involves job cuts and asset stripping. Shareholders are brought on board with the promise of increased dividends and a boost in share price.

There are numerous examples where the team has attempted to muscle in on operations, with Telecom Italia (TIM) being the most relevant in recent history. At TIM, Elliott Management has been battling with Vivendi for control and a new strategy, and it does appear to be winning.

In the case of AT&T, Elliott Management is promising a 65% increase in share price by the end of 2021. This is an attractive promise as share price has barely moved over the last five years, from $34.50 on September 12, 2014 to $36.25 at the close of the markets on Friday (September 6, 2019). During this period, a high of $43.28 was experienced on August 12, 2016, and a low of $28.31 on December 21, 2018.

But how do these numbers compare to the share price of AT&T’s rivals over the last five years?

Telco Today 12 Sept, 2014 High Low
AT&T $36.25 $34.50 $43.28 $28.31
Verizon $59.06 $48.40 $60.30 $42.84
T-Mobile US $79.15 $30.83 $84.25 $25.31
Sprint $6.82 $7.00 $9.30 $2.66

Although AT&T is a dominant force in the US telco industry, it has seemingly not capitalised on the 4G revolution in the same way some of its rivals have, most notably T-Mobile US. To rub salt into the wounds, AT&T failed to acquire T-Mobile US in 2011, had to pay the largest break-up fee to date (at the time), and then provided the firm with a seven-year roaming deal and spectrum. This could perhaps be viewed as the turning point for the struggling T-Mobile US.

Another interesting assertion from the Elliott Management team is inability of the AT&T business to act in a timely fashion. This is another point CEO Randall Stephenson should be worried about, as Elliott Management claims AT&T did not deploy 4G aggressively enough and lost out to Verizon in the battle for first place. With 5G on the horizon, investors might well be worried about a repeat.

Ultimately, the biggest criticism is one of poor performance. Despite some very attractive numbers in the 90s and 00s, AT&T hasn’t really pushed on to capitalise on this momentum. In fairness, every telco around the world has suffered over the course of the last decade thanks to the growing influence of the OTTs, but this point has been conveniently ignored in the Cohn and Steinberg letter.

However, it is the acquisition strategy is one of the biggest points made.

“In recent periods, however, AT&T has embarked upon a very different sort of M&A strategy,” the letter states. “Over a series of deals totalling nearly $200 billion, AT&T built a diversified conglomerate by pushing into multiple new markets.

“In each case, the push was as significant as possible. Beginning the decade as a pure-play telecom company with leading wireless and wireline franchises, AT&T has transformed itself into a sprawling collection of businesses battling well-funded competitors, in new markets, with different regulations, and saddled with the financial repercussions of its choices.”

The telco industry has changed in the last decade, and Elliott Management clearly doesn’t agree it is for the better. In the 90s and 00s, acquisitions were connectivity orientated, while recent years have seen an aggressive push into the world of digital services, diversifying products which can be offered to the consumer.

This is one of the critical points the Elliott Management team is levying towards AT&T; its acquisition strategy has not been effective. The failure to merge with T-Mobile US is a critical point, but since that point the team has spend more than $200 billion to create a beast of a business. Some have suggested this was necessary to diversify the business in preparation for the digital economy, however this is not the opinion of Elliott Management.

We do not agree with Elliott Management here. Convergence is a sound business model which moves the telco into the value-add column. A more stringent focus on connectivity will walk the telco down the road of utilitisation, opening the industry up to more aggressive regulations and price controls. This is not the direction many telcos want to head, but Elliott Management does seem to like the profits driven out of a business which focuses on operational efficiencies and little else.

Let’s not forget the Elliott Management business model after all. Identify underperforming shares, disrupt the business model for short-term share price rises and then sell the stock, while collecting meaty dividends along the way. If Elliott Management gets it way, AT&T will be a utilitised business, with fewer assets. It might not be a competitive force in a decade, when other telcos are reaping the benefits of diversification. However, Elliott Management will not care by that point.

Perhaps the three most important points of the plan set forward by Elliott Management are:

  1. A change in strategic direction from acquisition to executive
  2. Clearing out the current management team
  3. Divestment in non-core assets

There are other points made, such as closing redundant retail locations, negotiating more authorised third-party retailers, cutting back on the over-bureaucracy, simplifying the management structure and redundancies. However, we feel the three mentioned above are perhaps the most important for investors.

By shifting from an acquisition mind-set to an execution one, and making the suggestion of divestments, it would appear the AT&T business is one which will be focused more acutely on traditional telecommunications services. The tone of the letter does not suggest Elliott Management believe the content world is one which can bring fortunes, and the way in which the team discuss the success of T-Mobile US also alludes to this new, narrowed focus.

What does this mean for the very expensive content acquisitions? Perhaps nothing, or perhaps everything. We suspect the idea from Elliott Management would be to silo each of the business units, allowing a more lasered focus on core revenues in the siloes. There might well be cross-selling opportunities, but the language used by Cohn and Steinberg suggests digital services and ambitious convergence is not on the agenda.

The proposed strategy to realise the 65% increase in share price is one of simplicity, enhancing what is currently in the armoury and taking a more traditional approach to the business of connectivity.

And while there might be thousands of nervous employees throughout the organization worried of the prospect of job cuts, the senior management team should be much more concerned. After interviewing various former-executives, Elliott Management has come to conclusion that the executive management team does not have the right skillset to tackle the challenges which AT&T is facing today.

Should Elliott Management get its way, heads could roll, and the leadership team could look remarkably different. Elliott Management is also seeking greater influence for the Board of Directors, another common play from the team. The activist investor often looks to secure positions to friendlies at the companies it has in its crosshairs, and it will certainly want to exert more control on the strategy moving forward.

If Elliott Management gains control and influence at AT&T, it could look like a very different business. The investor believes it has identified $10 billion in cost-efficiencies would can be realised through spending $5 billion. This does not account for any divestments which would be made though. AT&T might well have fewer retail locations, a smaller headcount, a new management team, a lessened focus on content and digital services and a more utilised business model in the near future.

This is only the beginning of this saga, Elliott Management will certainly have a wrestle on its hands to gain control, but it does have good form when it comes to forcing through disruption.

Vivendi denounces TIM board

The emotional level of the custody battle for TIM has reached a new pitch, with Vivendi starting to lose its composure.

“Vivendi denounces the behaviour of the Elliott-nominated Telecom Italia (TIM) Board members who yesterday rejected by a majority vote the report issued by the company’s Board of Statutory Auditors, a totally independent body, citing serious irregularities related to the company’s governance and its Board,” opened Vivendi’s latest salvo, which claimed to be seeking to re-establish the truth.

It was issued in quick response to the TIM board’s own response to Vivendi’s previous moan about a recent auditor’s report – you see how convoluted this is getting. It unsurprisingly thinks the perspective of the TIM board “…fails to mention several acts of serious misconducts by the Chairman and the lead independent director, who did not inform all independent directors in the same manner and were clearly selective in their interactions.”

Here are the questions Vivendi reckons remain unanswered:

  • Why did the Chairman organize the preparatory meeting concerning the dismissal of Amos Genish with the sole participation of the ten Board members designated by Elliott?
  • As widely reported by the Italian press, why did at least one preparatory meeting take place in the presence of only the ten Board members nominated by Elliott prior to the November 18, 2018 Board meeting?
  • Did the Chairman have any contact with any of Elliott’s representatives before or after the Board meetings of the 13th and 18th of November?
  • What was discussed at the meeting between the Chairman and the representatives of at least one minority shareholder that occurred on the 12th of November 2018?
  • What were the criteria used in the selection of the legal advisor for a decision as important as the dismissal of the CEO when it was well known that the same law firm has represented Elliott in the past and even sued TIM in recent months?
  • Does the Chairman believe he still has the confidence of the minority Board members, the Board of Statutory Auditors and the market?
  • Has the Chairman considered stepping down from the Board, in light of the findings of serious breaches in his duties that have emerged from the Report of the Board of Statutory Auditors?

In common with its opponents Vivendi also has a special website for its propaganda in this matter. It wants both the statutory auditors and CONSOB, the Italian securities regulator, to look into this further because it doesn’t think the Elliott-dominated board of TIM can be trusted to ‘self-police’. Ultimately, of course, Vivendi wants to restore its own dominance of the board, because it did such a great job of self-policing last time.

TIM board slaps down Vivendi moans

It took the TIM board a few days to respond to a bunch of accusations thrown at it by Vivendi, but the result was pretty comprehensive.

At the start of the week we reported that the battle between French conglomerate Vivendi and activist investor Elliott for control of Italian operator group TIM had degenerated to the point of resembling an acrimonious custody battle. The latest initiative from Vivendi was to accuse the TIM board of bad behaviour and state that this was the result of it being dominated by Elliott nominees.

That same board has now responded, laying out six Vivendi accusations and addressing each one at considerable length. We’re not going to lie to you, dear reader, the response is far from being a riveting read. But such is our devotion to duty here at Telecoms.com that we’ve digested the essence so you don’t have to. Italics denotes a direct copy from the document and regular font denotes our summaries of the TIM response.

Essentially, according to shareholder Vivendi and Mr de Puyfontaine, the Board is alleged to have:

(i) executed an unwarranted impairment test process which allegedly resulted in an equally unwarranted writedown of goodwill for a grand total of 2 billion euros in the interim report on operations at 30 September 2018;

  • The reasons for this have already been published and the process was signed off by loads of expert third parties. Furthermore the decision was overwhelmingly approved by the board, including Amos Genish.

(ii) utilised the circumstances that led to the impairment to revoke the powers assigned to Mr Amos Genish;

  • He was doing a rubbish job and there’s loads of evidence to prove it.

(iii) breached the rules of governance in the process that led to the aforementioned revocation;

  • He was doing such a rubbish job that we couldn’t waste any time in replacing him as CEO.

(iv) breached the rules of governance in the process whereby powers were attributed to Mr Luigi Gubitosi;

  • See previous answer.

(v) breached the current regulations on the occasion of Vivendi’s request for a TIM shareholders’ meeting to be called to:

(a) appoint the external auditors for the period 2019-2027;

(b) revoke the mandates of five directors, in the persons of Fulvio Conti, Alfredo Altavilla, Massimo Ferrari, Dante Roscini and Paola Giannotti de Ponti, and

(c) appoint five Directors, in the persons of Franco Bernabè, Rob van der Valk, Flavia Mazzarella, Gabriele Galateri di Genola and Francesco Vatalaro, to replace those whose mandates were revoked;

  • We already addressed this. Everything was done by the book and loads of experts will back us up on that.

(vi) breached current law on the occasion of the announcement to the market of preliminary 2018 results below the consensus and prudent estimates for the first half of 2019, allegedly thus causing a fall in the share price, as well as a loss of trust among investors.

  • On the contrary the law obliged us to make that announcement.

The response concludes by noting, as it was bound to, that Vivendi’s accusations are groundless and everything the board’s actions have been exemplary and beyond reproach. Vivendi can’t have expected anything else, but at least it forced the board to explain itself fully ahead of the shareholder meeting at the end of this month. It will presumably spend the intervening time picking holes in it.

The custody battle for TIM between Vivendi and Elliott gets personal

Vivendi says a recent TIM auditors report shows dodgy behaviour from Elliott, which in turn reckons Vivendi is a negative influence on the company.

Every new phase of the battle for control of Italian operator group TIM (the artist formerly known as Telecom Italia) is increasingly taking on the characteristics of an acrimonious custody fight. Each party takes turns in publishing claims of what a bad parent the other is, while at the same time insisting that it only wants what’s best for tiny TIM.

The latest salvo from Vivendi is a press release responding to a recently-published statutory auditors report (only in Italian, as far as we can tell)The release is headlined: ‘The irregularities in governance at Telecom Italia revealed by the Statutory Auditors report reinforce Vivendi’s position to request a return to a more balanced Board of Directors,’ which is consistent with pretty much all of Vivendi’s public statements on the matter since it lost control of the TIM board to Elliott last year.

“Vivendi is extremely concerned by the outcome of the Telecom Italia Statutory Auditors report released today confirming the existence of serious irregularities related to the governance of the company and its Board of Directors of which a majority of members are from the Elliott list,” opens the body copy. “This report reveals that the Chairman of the TIM Board violated corporate laws as well as the most basic, fundamental governance rules.”

It goes on to note the apparent existence of a ‘shadow board of directors’ consisting of just the Elliott-nominated ones, and says the auditor’s report reveals evidence that privileged information had been leaked to third parties prior to a previous board meeting. It doesn’t say who may have leaked that information but obviously Vivendi thinks it was someone affiliated to Elliott. All this goes to show how important it is that the shareholders get rid of some Elliott-nominated board members at a meeting on 29 March, according to Vivendi.

Elliott doesn’t seem to have directly addressed the Vivendi press release, but did publish one of its own this morning, merely entitled ‘Elliott statement on Telecom Italia’. Aside from dead-naming the company, the point of the release is to address the shareholder meeting and implore them not to replace any Elliott-nominated board members with fresh Vivendi ones.

Elliott believes Vivendi’s nominees are unsupportable, lack true independence, and would simply return control to a group with demonstrable conflicts of interest, related party transactions and a history of undermining TIM shareholders,” said the Elliott release.

“Elliott believes it is time to give TIM and its independent Board stability and space to implement its strategy, to achieve much-needed reform and to deliver sustainable shareholder value. It is time for TIM to shake off the damaging management of the past and reaffirm its decision to move confidently into the future. It is time for TIM, in the words of its new CEO, to become a “normal company.”

To support its position Elliott has published a presentation that can be accessed through a special website called time-for-tim.com (do you see what they did there?). The 40-page (yes, 40) presentation provides an exhaustive list of reasons why Elliott is great and Vivendi is rubbish, a lot of which amounts to an attack on French conglomerate Bolloré Group, which is the dominant shareholder at Vivendi, and which Elliott apparently suspects of nefarious motives.

We have seen nothing to make us pick one side over the other in this dispute. They both seem to want control of TIM to further their own ambitions, whether it’s short-term profit-taking or as a small part of a broader long-term strategy. Both are someone disingenuously claiming to only have the best interests of TIM at heart, but if we had a vote at the shareholder meeting we’d be tempted to get rid of both of them, if that were an option. TIM declined to comment when we contacted it.

Elliott strengthens its position at TIM

Vivendi wants Italian operator TIM to have a special meeting to choose new board members, but its auditors don’t agree.

The request was originally made by Vivendi at the end of last year, in apparent response to Amos Genish but essentially a delayed reaction to it losing control of the TIM board to activist investor group Elliott earlier in the year. Elliott is understandably less keen on having such a meeting and Vivendi isn’t happy at what it perceives as breaches of corporate due process.

In a somewhat convoluted and legalese press release TIM’s board of statutory auditors said it has been thinking about Vivendi’s request but it’s not convinced a special meeting before the scheduled AGM at the end of March is required.

“This Board has evaluated the procedure that led the Company’s Board of Directors to call a Meeting of Shareholders for the coming 29 March, the agenda for which includes the same matters that Vivendi had asked be discussed separately,” said the PR.

“Following that evaluation, and on the basis of the information available, in relation to the Board’s decision we consider that the conditions for the exercise of the powers to convene a specific meeting pursuant to Art. 2367 have not been met;

“This Board reserves the right to review its opinion about the calling of a Meeting of Shareholders, should the results of the investigation into the events reported by Vivendi reveal any new information or situations that were previously not considered.”

As indicated by the last paragraph, the auditors are still looking into Vivendi’s request, but it seems to have made up its mind. Vivendi hasn’t published a response to this decision yet, but it’s hard to see what else it can do to impose its will on the company it once seemed to completely control.

In related news last week Elliott dropped some more cash to increase its stake in TIM. “The Reporting Persons believe the securities of the Issuer are undervalued and represent an attractive investment opportunity,” said the filing. “Accordingly, the Reporting Persons have increased their beneficial ownership of the Issuer from their last reported 13D filing on April 9, 2018 from 8.8% to 9.4%.

“The Reporting Persons believe that there are several pathways for the Issuer to enhance shareholder value, including but not limited to, the separation of its fixed line access network (NetCo) and the evaluation of market consolidation options, as well as the conversion of the saving shares. The Reporting Persons believe any change in composition of the Board at this juncture would be detrimental to the execution and delivery of the Issuer’s anticipated value creation plans.”

In response to this move a Vivendi spokesperson said: “Elliott is acting as a pure financial investor, that is to say, using an opportunistic approach to take advantage of the 45% drop in the share price. The share price is currently so low because of Elliott’s own terrible governance since May 4. There is currently no industrial plan.”

As expected TIM delays shareholder meeting and Vivendi moans

The TIM board met today to discuss Vivendi’s request for a shareholder meeting and decided it can wait until the end of March.

This outcome had been widely expected and Vivendi already had its public moan written in advance. “Vivendi deplores the time-wasting tactics used by the Elliott Board members of Telecom Italia (TIM) who have decided to delay until March 29 the holding of a Shareholders’ Meeting, contrary to the company’s by-laws and the Italian Civil Code,” thundered the Vivendi release.

Just to remind you, ten out of the 15 TIM board members were proposed by Elliott and five by Vivendi. There was a time when the opposite was true and Vivendi regards that time with deep longing. That’s why it wants another vote in which it hopes to regain control of the board. If it ever is successful in that respect it will, of course, be guilty of none of the self-interested behaviour it accuses Elliot of.

“These time-wasting tactics are negatively impacting TIM’s financial results every day, as is sadly reflected by the more than 40% drop in the share price since May 4, 2018,” persisted Vivendi. “These tactics constitute a genuine denial of shareholder democracy and run counter to the most basic and fundamental principles of good corporate governance.”

Here’s what TIM announced following the meeting:

In taking this decision by a majority vote, the Board of Directors considered the motivations the shareholder has given for making this request, and the company’s interest in a (single) meeting to discuss the various issues the shareholders are called to resolve on, so as to:

- facilitate the completion of the processes to approve and disclose the strategic plan, the related impairment test on goodwill and hence the financial statements, and thus

- ensure that the shareholders have a proper and adequate information set,

while also promoting the greatest possible participation in a shareholders’ meeting, in which there is likely to be a substantial confrontation on what the industrial future of the Company is to be and on the people its management should be entrusted to.

There was plenty more but you get the gist. The Elliott-dominated TIM board has to grant Vivendi’s request eventually but it doesn’t see any reason why it should be in any hurry about it. The nature of corporate shenanigans means it can’t just say “we can’t be bothered for now” so it needs to give the decision a veneer of due process. There doesn’t seem to be much Vivendi can do about it, however, so things may go quiet on this story for another couple of months.

Vivendi war with Elliott over TIM set to escalate

Ahead of a TIM board meeting today Vivendi and TIM Chairman Fulvio Conti have been publicly bitching at each other.

An unnamed Vivendi spokesperson got in touch with the Sunday Times to brief against Conti yesterday, accusing him of failing to represent all shareholders. Vivendi is a 24% shareholder in TIM and has been upset ever since it lost control of the board to activist investor Elliott last year and has consistently questioned Conti’s impartiality.

Vivendi wants another vote on the composition of the TIM board, with the apparent aim of restoring its control. TIM has been slow to grant this request, prompting Vivendi to accuse Conti of carry out ‘absurd time-wasting tactics’. “The Chairman [of Vivendi, presumably] feels he [Conti, presumably] no longer represents Telecom’s shareholders as a whole and is therefore trying to avoid a democratic vote,” the mystery Vivendi spokesperson is quoted as saying in the ST piece.

In possible anticipation of the ST piece TIM issued a rambling statement from Conti on late on Friday that he may have dictated after his first grappa of the evening. Here it is in full.

Vivendi is always able to surprise me, ascribing me powers I do not have. Truth is, I am Chairman of a Board of Directors that has a significant presence of Vivendi-appointed members (including the Vivendi CEO), along with nine members – including me – with renowned standing that have complete autonomy of judgement.  I also remind that the Vivendi-appointed Directors have, in the past, had the opportunity to hear me during Board meetings asking them not to discuss TIM matters when markets are open. Evidently, I was not clear enough.

On the specific topic, I work in the interest of all shareholders, and by respecting the shareholder with 24% I cannot neglect to take into account the remaining 76%. If Vivendi has at heart the rules of a democratic vote, it will have to await the convening of the shareholders meeting which will be deliberated by the next Board of Directors on January 14, and this shall happen in complete autonomy, respecting the Civil Code which provides for the convening of an Assembly within 30 days of the request. This call date must take into account the interests of shareholders and the interests of the company. I inform the gentlemen at Vivendi that the civil code, in contrast to what the Vivendi spokesperson said, does not provide for a specific time limit to convene the shareholders meeting, but entrusts the Board of Directors to determine a correct date to hold it appropriate for all the interests at play.

With regard to the management issue, I have not personally orchestrated anything, but acknowledged the will of the majority of the Board of Directors whose vote expresses its loss of confidence in the former CEO Amos Genish. More than the management powers that Vivendi’s spokesman attributes me, I would like to draw attention to the years in which Vivendi has led TIM compared to my full 4 days.

While all this gives telecoms hacks something to write about on a Monday morning, these public statements are aimed squarely at TIM shareholders, who Vivendi wants to push for this new vote. An announcement is expected from TIM later today and Telecoms.com understands the Telecom Italia board will look to delay a vote around the election of new board members. This will lead to further public moaning from Vivendi, so watch this space.

Vivendi doesn’t think the TIM board is independent enough – hmm

As promised Vivendi has written to the board of Italian operator group TIM in a bid to replace Elliott-nominated members with its own proposed ones.

Here’s the entire text of the letter, dated 14 December 2018: ‘As announced on December 11, 2018, Vivendi wrote today to the Telecom Italia Board of Directors to urge it to convene a Shareholders’ Meeting as soon as possible to vote for the appointment of new financial Auditors.

‘Vivendi also asked that the agenda of the Shareholders’ Meeting includes a vote on the revocation of five Board members from the Elliott list who showed a substantial lack of independence and disrespect for the most basic and fundamental corporate governance rules, negatively affecting the organization and image of Telecom Italia. The Board members concerned by this revocation are: Fulvio Conti, Alfredo Altavilla, Massimo Ferrari, Dante Roscini and Paola Giannotti de Ponti.

‘To replace them, Vivendi asked that five new Board members be proposed to the Shareholders’ Meeting, all independent candidates with strong expertise and proven track records. The candidates proposed include four Italians and are: Flavia Mazzarella, Franco Bernabè, Gabriele Galateri di Genola, Rob van der Valk and Francesco Vatalaro.

‘Biographies of the candidates proposed as Board members are attached.’

The details of this disrespect for corporate governance rules are omitted from the letter as are the details of what these five board members did to show their lack of independence. There was an additional report attached to the letter, however, that does offer more.

Conti is accused of acting in bad faith during the process to turf out the previous Vivendi-supported CEO Amos Genish. Roscini is Lead Independent Director, but is accused of keeping stuff from the Vivendi-nominated ones. Ferrari is accused of speaking out of turn to the press, Altavilla of plotting Genish’s demise, and De Ponti of being complicit in that plot. Basically they’re all accused of acting in bad faith over the Genish sacking.

Cries of board bias are a bit rich coming from Vivendi which, until earlier this year, had the board stacked mainly with its own nominees. Most of them were nominally ‘independent’, but such was the influence Vivendi was apparently able to exert over the board that the Italian securities regulator was moved to proclaim it had de facto control of the company.

Now that Elliot is enjoying equivalent de facto control of the company Vivendi is crying ‘no fair’, but you can’t have it both ways guys. The Vivendi report stresses it doesn’t have any desire to take control of TIM but given its past form in that area, such claims are difficult to swallow. TIM has published a short announcement acknowledging receipt of the letter and noting that it has already said it will be looking into the auditor situation next month.