Iliad flogs a bunch of towers to reduce debt pile

French telecoms conglomerate Iliad is selling most of its tower assets in France and Italy to Cellnex for €2 billion.

Iliad has debts in excess of €4 billion and seems to think paying some of them off might be an idea. Fellow French giant Altice has recently had to do a bunch of debt refinancing but it apparently had to pay a premium to do so. European telcos are increasingly inclined to sell and lease back assets like towers to free up cash for 5G investments and that sort of thing.

In France Iliad will be selling 70% of the company that manages 5,700 cell sites to Spanish infrastructure specialist Cellnex, while in Italy it’s offloading the whole company that takes care of 2,200 sites. Right now the whole process is at the ‘exclusive negotiations’ stage but that seems like a formality.

“This transaction is part of a long term industrial strategy allowing us to accelerate rollout of our 4G and 5G networks and to increase Iliad’s investment leeway,” said Thomas Reynaud, Iliad’s CEO. “This transaction supports the group’s new growth and innovation cycle. It enables more efficient infrastructure roll-outs in the future while meeting the challenges of further increasing territory coverage.”

On top of this Cellnext is acquiring 90% of the company that owns 2,800 sites in Switzerland from Salt.

“[These deals] allow us not only to reinforce our position as the main independent infrastructure operator in France, but also to decisively strengthen our platform in Italy, a key a strategic market, and significantly expand our foothold in Switzerland,” said Cellnex CEO Tobias Martinez.

“Furthermore, Cellnex strengthens its role as a neutral host by having two major anchor tenants within its sites network. The combined effect of these agreements is an increase of our current  portfolio across six European countries by more than 50% –to 45,000 sites in total. The latter allows us to properly assess the very quantum leap nature of these deals.

“A greater density and capillarity of our sites networks means a differential added value that enhances Cellnex’s role as a natural partner for all mobile operators in Europe, meeting their densification needs in the current 4G roll-out while accelerating that of 5G.”

Vodafone found vulnerabilities in Huawei kit but stuck with it because it was cheap – report

The latest mini-leak in the ongoing Huawei propaganda war saw Vodafone admit to finding security flaws in some Huawei kit in the past.

The scoop comes courtesy of Bloomberg in a story headlined Vodafone Found Hidden Backdoors in Huawei Equipment. The kit in question was mainly domestic routers and some optical service nodes supplied to its Italian business back in 2011, which the report claims had security backdoors that could have given Huawei access to the whole fixed line network (which Vodafone denies). Vodafone told Bloomberg the issues were eventually resolved, but it’s far from an open-and-shut case.

Vodafone said it asked Huawei to deal with the backdoors as soon as it spotted them and was told that they had been, but it took further prompting to get the lot of them. Furthermore some anonymous sources told Bloomberg that the vulnerabilities remained beyond 2012 and were also present in Vodafone networks in other countries, including the UK. Vodafone allegedly knew about this but stuck with Huawei regardless because they were relatively cheap.

Apparently some in Vodafone had concerns about the security of Huawei routers from the start and flagged a bunch of bugs up, the most critical of which was a ‘telnet’ service that allows remote access. Vodafone Italy asked Huawei to remove this telnet and was once more told that it had been, while subsequent testing revealed it hadn’t. Huawei then apparently shifted the goalposts, saying it needed the telnet to configure devices, and offered to remove it once the configuration had been done.

This reportedly caused concern for Vodafone’s chief information security officer at the time, Bryan Littlefair, who wrote the following in a 2011 report: “What is of most concern here is that actions of Huawei in agreeing to remove the code, then trying to hide it, and now refusing to remove it as they need it to remain for ‘quality’ purposes.”

Now it should be stressed that this is still far from the smoking gun evidence of inherent security vulnerability the US claims to have and which Huawei wants to see. This stuff took place years ago and seems to have been quite isolated. Furthermore Huawei is hardly the only vendor to have vulnerabilities in its routers. Having said that this latest piece of circumstantial evidence is certainly unhelpful l to Huawei in the current environment and could well cause some reputational damage to Vodafone too.

Vivendi conditionally concedes defeat in TIM board battle

French conglomerate Vivendi withdrew its bid to replace five TIM board members at the 11th hour but doesn’t seem happy about it.

TIM shareholders were due to vote on Vivendi’s request to replace those board members it had identified as acting in bad faith last Friday. But at the meeting itself TIM CEO Luigi Gubitosi apparently had one last attempt to get Vivendi to back down and, amazingly, it did. Presumably it had realised it wasn’t going to win the vote and not to have it rather than suffer a humiliating defeat.

Here’s what Caroline Le Masne de Chermont, Vivendi Group Head of Legal Affairs (why do Vivendi execs all sound like aristocrats?), had to say at the meeting:

“As extensively expressed in our request, we asked the shareholders to vote for a change of governance, because what happened in and around the Board since last May has affected the stock price, and the whole functioning of the company.

“However, there is no point in revisiting here and now the events of the last year, particularly those that cannot be changed. Let’s focus instead on the changes we would like to see in the near future. Vivendi wishes TIM’s board to be more reflective of the company’s shareholder base and to be led in an independent, transparent and fully inclusive manner.

“To conclude, we are prepared to give credit to the CEO. Accordingly, following his suggestion, Vivendi has decided not to pursue today its proposal to revoke and replace five Board members, provided that this has the support of the shareholders’ meeting.

“What needs to occur next, may at this stage be left in the hands of the Board members and their individual conscience. What we can say is that if change does occur as the CEO announced, he can count on our loyal and stable support as the company’s largest shareholder.”

Essentially Vivendi seems to be conceding defeat, for now, in its battle to control the TIM board, but reserves the right to kick off again if the current board doesn’t start raising its game sharpish. Vivendi has presumably realised its open hostility to the TIM board isn’t a great look and its sudden conciliatory stance about letting bygones be bygones is just hilarious.

In response Elliott issued the following statement: “Elliott welcomes Vivendi’s decision to withdraw its request to shareholders to revoke five of TIM’s Directors, a clear sign that Vivendi understands that there is broad support for TIMs existing independent Board.

“This outcome is a victory for the company and paves the way for stability and sustained value creation for all of TIM’s stakeholders. Elliott remains fully supportive of CEO Luigi Gubitosi, the Company’s management team and the existing independent Board, and looks forward to constructive dialogue with all stakeholders to pursue a value maximising path forward for the company.”

Gubitosi himself apparently struck a cautiously conciliatory tone, calling the move courageous and a first step towards peace. TIM shareholders will presumably be happy that this period of corporate turmoil has been concluded, although shares were only up a few percent on Friday. Maybe this muted optimism was a consequence of the veiled threats contained within Vivendi’s climb-down. It may have exhausted this strategy but this is unlikely to be the last time Vivendi clashes with Elliot over TIM.

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.

Vodafone Italy set to cut 1,130 jobs

Vodafone has decided its Italian arm needs a new cunning plan and, as is so often the case, it’s likely to involve a bunch of redundancies.

Right now we’re dependent on a press release written in Italian and the best efforts of Google Translate, so bear with us. Vodafone Italia seems to be announcing a new industrial strategy, that special kind that requires immediate consultation with trades unions. Since unions only tend to get involved when there are mass lay-offs, that can only mean one thing.

In stark contrast with its previous apparent optimism about the Italian market, Vodafone now sees extraordinary competitive pressure in in that country, which has led to a drastic drop in prices and hence a sharp contraction of the whole telecoms sector. As a result Vodafone’s bottom line in Italy is heading in the wrong direction and something’s got to give.

While a lot may have been lost in Google translation, the remedial measures seems to follow the standard clichés of streamlining, agile operating models and a focus on margin to enable continued investment. All this means cutting overheads, which is traditionally done through redundancies. The announcement speaks of 1,130 efficiencies.

In hindsight the writing has been on the wall for a little while. Vodafone was one of the big spenders in the recent Italian 5G spectrum auction and subsequently announced it was going to do a nice lot of infrastructure sharing with fellow big spender TIM. With new entrant Iliad contributing to the aforementioned competitive pressure we would be surprised if this is the last bit of streamlining news to come from the Italian telecoms market.

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.

TIM and Vodafone Italia sign 5G network sharing pact

Competing Italian MNOs TIM and Vodafone Italia have decided it makes sense to pool their resources when it comes to 5G infrastructure.

Having blown their reserves on the recent 5G spectrum auction, the two have presumably spent the intervening time contemplating awkward concepts like return on investment. Rivals tend not to partner unless they’re so desperate for the return on such a move that it outweighs their instinctive aversion to cooperating with each other.

Hence they have signed one of those rather limp memoranda of understanding, that in this case is a public statement that they’re both up for active network sharing over 5G, but they can also bail out as and when they no longer fancy the idea. Active network sharing involves the actual kit, while passive just means sites, towers, etc.

They already have a passive sharing agreement in place for 4G and that has presumably gone smoothly. So TIM and Vodafone now reckon it may be time to take their relationship to the next level and get active with each other. The main focus of all this activity is 5G but they’re seriously considering extending that to 4G too.

“This partnership will allow our customers to enter the 5G revolution faster and deeper, while at the same time making the best use of both companies’ resources,” said TIM CEO Luigi Gubitosi. “We believe that network sharing is key to do more, effectively and better for the benefit of our clients and all stakeholders, in view of the process of change that will be triggered by the launch of 5G in the years to come and that will be paramount for the development and digitalization of our country.”

“This partnership will allow us to generate significant benefits for our customers and other stakeholders, who will be able to enjoy the best 5G experience, made available in a shorter period of time and across a wider geographical area,” said Aldo Bisio, CEO of Vodafone Italia. “5G represents a technological breakthrough that will have a profound impact on society, and that requires investment, efficiency and a rapid rollout. This has led us to broaden the scope of our existing successful partnership.”

They even have aggressive ambitions for the passive side of things and are contemplating combining the 22,000 towers they collectively own into one company. This wouldn’t be entirely straightforward as TIM’s tower division – Inwit – is partly independently listed so there will be extra scrutiny over the pros and cons of the move.

The announcement coincides with TIM’s full-year 2018 numbers and its announcement of a new cunning plan for the next three years. Revenue growth was flat and the plan is the usual corporate stuff about efficiencies, profit, etc. While partnerships like this have a distinctly defensive feel about them that doesn’t mean they’re a bad idea and if they’re shown to boost the bottom line then everyone’s a winner.

Signs not looking positive for Huawei and ZTE in Italy

Reports in local press suggest Italy could be the next country to bow to pressure from the US, banning Huawei and ZTE from contributing to communications infrastructure.

Although many telcos across the bloc have been taking precautionary measures against Huawei and ZTE, Telecom Italia (TIM) has previously stated it would continue to work with the vendors until the government told it otherwise. This is a market which looked relatively safe for the both parties, but things are starting to look quite wobbly.

This is a largely unconfirmed report however Italy’s La Stampa newspaper has claimed the Defense Ministry and Ministry of Foreign Affairs is ready to bring out the ‘Golder Powers’ to enforce the ban. The ‘Golden Powers’ effectively give the government the power to do whatever it wants, and in this case will be applied to contracts allowing the government and telcos to exit without financial penalties from the vendors.

Security concerns have of course been cited as the reasoning, with the paper suggesting strong pressure from the US government. Italy currently has several US military bases across the country.

The US government has been on somewhat of a European road-trip over the last month, with Foreign Office officials meeting with counterparts in European governments to pitch the case of paranoia. Although little concrete evidence has been presented to support the accusation companies like Huawei are supporting the Chinese government’s espionage campaigns, Europe does seem to be turning against the vendor.

Italy might be the next domino to fall, though it seems to be in a race with Poland. Following the arrest of a Huawei employee in recent weeks on the grounds of corporate espionage it does look like the vendor (or potentially Chinese companies on the whole) will be banned from the country. This would be a huge decision to make though as Poland acts as the HQ for Huawei’s Eastern European business, employing roughly 900 people.

While there are countries which are resisting the calls to ban Chinese involvement in 5G infrastructure, Germany is one drafting rules to heighten security requirements and Huawei has seemingly ticked all the boxes in the UK, the power of the US lobby is proving effective. Of course, these battles in the individual nations are only part of the problem, the US delegation has been whispering in the ear of the European Commission in recent weeks. We all know the Brussels brunch brigade love a free lunch…