Now with added video!
As anticipated by Telecoms.com last week, Telecom Italia (TIM) has appointed current board member Luigi Gubitosi as its new CEO.
Gubitosi has been given the gig less than a week after the former CEO Amos Genish was unceremoniously shown the door, having been reassured his job was safe. His replacement is a member of the TIM board nominated by Elliott, the activist investor group that wrested control of the TIM boardroom from Vivendi. Genish was a Vivendi appointee and remains on the board.
This is just the latest chapter in the battle for control of TIM with a view to extracting value from it. Last year we asked how Vivendi, with less than a quarter of TIM shares, could apparently dictate the direction of the company. Elliot clearly felt the same and successfully challenged Vivendi. But now, with less than a tenth of TIM stock, it’s trying the same move.
You don’t have to be the biggest cynic in the world to figure both parties are in it for themselves. The biggest apparent difference between their competing visions is a matter of short-termism. The rhetoric coming from the Vivendi camp is that it’s interested in the long-term health of the company, while Elliot is effectively engaged in asset-stripping in order to give it a more immediate return and exit on its investment.
The main manifestation of this is the plan to spin off TIMs network holdings into a separate company, imaginatively called Netco, that would still be wholly-owned by TIM. This feels like a cosmetic change but it would apparently free up some value, for some reason, perhaps by saddling it with loads of debt. The longer-term danger is that this would be a precursor to disposing of those assets entirely in the long term.
Genish is not a fan of this approach, and recently offered the following statement: “Any decision to break up the company, including losing control of the fixed network, must go back to the shareholders for a vote.” He will apparently seek shareholder support for an extraordinary shareholder meeting to address this, which shouldn’t be a problem if Vivendi is still backing him, but it’s not yet clear whether this will amount to an attempt to regain control of the board.
Elliot affiliation aside, Gubitosi looks pretty well qualified for the gig. He did a couple of decades at Fiat before joining MNO Wind, where he was CEO between 2007-2011. He moved on to be General Manager of state broadcaster RAI and, like any self-respecting member of the elite, is on a bunch of boards, committees and that sort of thing. His rich history of working with the Italian state might come in handy in the network spinoff process.
It’s very unlikely that Vivendi and other shareholders will take this further power grab by Elliott lying down, so this story is likely to keep giving for a while yet. Both parties will spout rhetoric about how invested they are in the future prosperity of TIM, but they only differ in their value-extraction strategies. In the meantime TIM remains hamstrung at a time when new entrant Iliad Italy is taking massive chunks of mobile subscriber share. It’s hard to see how that’s going to benefit anyone with a stake in TIM.
In one of the least surprising board room purges ever, Telecom Italia (or TIM for short) has got rid of its CEO Amos Genish.
“TIM’s Board of Directors met today and deliberated by a majority vote to revoke with immediate effect all powers conferred to Director Amos Genish, giving mandate to the Chairman to resolve further obligations in relation to the existing working relationship with Genish,” said a TIM announcement today.
“In accordance with the succession plan for Executive Directors adopted by TIM, the proxies revoked to Director Amos Genish were provisionally assigned to the Chairman of the Board. The Chairman of the Nomination and Remuneration Committee has called for a meeting of the latter, in compliance with its responsibility in identifying the new CEO.
“A new meeting of the Board of Directors to appoint a new CEO was convened for November 18. The Board of Directors thanks Amos Genish for the work done in the interest of the Company and all its stakeholders in these fourteen months of intense activity.”
The removal of Genish had seemed inevitable since investor group Elliott won a battle with French conglomerate Vivendi, for control of the TIM board room, back in May of this year. Genish had previously been installed as CEO while Vivendi was still calling the shots, but after winning control Elliott made all the right noises about Genish having their full confidence.
This always seemed somewhat tenuous, with Genish’s loyalties presumably under suspicion and him providing at the very least a convenient scapegoat as and when things took a bad turn at the company. That came to pass last week when TIM said it was writing down the value of its assets by €2 billion and exacerbated by a disagreement between Genish and the board over what to do about TIM’s fixed line network.
Rumours emerged early this week that Genish’s days were numbered and that the board was about to convene a special meeting to agree on his demise. Hilariously TIM issued statements to the press denying such a thing was going to happen just a day or two before it did. TIM has a rich history of deceptive press communications but this outright lie was shameless even by its standards.
“This is a shock,” Analyst Paolo Pescatore of Midia Research told Telecoms.com. “However, ongoing turmoil at the company continues to drag it down. The company is very well placed given its assets and early move to secure a leadership position in 5G. Further tussles will hand its fierce rivals a competitive edge.”
So what next? Elliott apparently has less than a week to come up with an alternative CEO that will do its bidding and the remaining Vivendi board members will presumably oppose whoever they put forward. Above everything else, however, this is another opportunity to finally appoint a CEO whose first name is Tim. Surely everyone can agree on the importance of that.
Despite governments around the world turning against Chinese vendors, Telecom Italia has agreed a new partnership with Huawei based on Software Defined Wide Area Network (SD-WAN) technology.
As part of a strategy aimed at evolving TIM’s network solutions for business customers, Huawei’s SD-WAN technology will be incorporated to create a new TIM service model which will allow customers companies to manage their networks through a single console.
“Today, more than ever, companies need networks that can adapt to different business needs over time, in particular to enable Cloud and VoIP services,” said Luigi Zabatta, Head of Fixed Offer for TIM Chief Business & Top Clients Office. “Thanks to the most advanced technologies available, these networks can be managed both jointly and by customers themselves through simple tools.
“The partnership with Huawei allows us to expand our value proposition for companies and to enrich our offer through the adoption of a technological model that is increasingly and rapidly emerging in the ICT industry.”
The partnership is a major win for Huawei considering the pressure the firm must be feeling over suspicions being peaked around the world. Just as more countries are clamping down on the ability for Huawei to do business, TIM has offered a windfall.
Aside from the on-going Chinese witch hunt over in the US, the Australians have banned Huawei from participating in the 5G bonanza and Korean telcos have left the vendor off preferred supplier lists. Just to add more misery, the UK is seemingly joining in on the trends.
In recent weeks, a letter was sent out from the Department of Digital, Culture, Media and Sport, and the National Cyber Security Centre, warning telcos of potential impacts to the 5G supply chain from the Future Telecom Infrastructure Review. China was not mentioned specifically, and neither was Huawei, but sceptical individuals might suggest China would be most squeezed by a security and resilience review.
The rest of the world might be tip-toeing around the big question of China, but this partnership suggests TIM doesn’t have the same reservations.
Telecom Italia has taken to the sixteenth edition of Rally Legend to show off its 5G smarts in the test bed of San Marino.
The microstate, which is currently serving as the Telecom Italia 5G living lab, is the first state in Europe to experience the 5G euphoria, with the Rally Legend event, a car racing bonanza, the latest experiment.
“We are particularly delighted to be able to work alongside Rally Legend to demonstrate how new technologies can support sports events at an international level,” stated Cesare Pisani, CEO of TIM San Marino.
“With the ‘San Marino 5G’ project TIM aims to deliver technological excellence to the Republic of San Marino making it the first 5G State in Europe. The activities are proceeding in line with the plans agreed with local government and the switching on of the Serravalle Stadio antenna, together with uses that have already been implemented, represent a new important step along this path.”
After Secretary of State for the Territory and Tourism, Augusto Michelotti, switched on the new Serravalle Stadio 5G antenna the fun began. 360° cameras have been activated on the race track, allowing fans to experience the action through VR headsets, while the TIM streaming platform will broadcast the footage on large screens throughout the village. Aside from traditional cameras, live action cameras placed inside the cars and web operators who shoot footage of the race with their smartphones, will also contribute to the action.
While all the demonstrations and trials in San Marino are small scale, the lessons learned through the real-world lab will pay dividends ahead of the up-coming launch in Italy.
Telecom Italia has announced it expects 5G services to be greenlight in San Marino by the end of the year, making it the first 5G state in Europe. If only they had the handsets.
With TIM engineers plugging away in Faetano to hook up 3GPP Rel15 standard radio equipment with Massive-MIMO technology, the aim is to have complete 5G coverage by the end of the year. With the team back in head office running the final tests on 26 GHz millimetre waves in the 26.5-27.5 GHz frequency range, the hope is San Marino will become a living lab to test out new 5G services.
“The installation of the first 3GPP 5G site is the peak of a virtuous cycle of innovation launched by TIM a few years ago, working with the standardization bodies and contributing since the beginning to the ITU R ‘Vision’ recommendation which defined the founding concepts of 5G, subsequently guiding work on the technical specifications for 3GPP Rel15 and later,” said Elisabetta Romano, CTO at TIM.
“Nokia has developed an end-to-end 5G Future X portfolio that will deliver unprecedented capabilities and efficiencies for customers such as TIM, allowing them to transform their service offering,” said Marc Rouanne, President of Mobile Networks at Nokia. “Working together we will explore the potential of 5G services that align with TIM’s vision of meeting the future demands of a diverse range of industries and consumers.”
The first stages of the deployment plan were complete with various successful trials run over the 3.5 GHz frequency band, though it seems the 26 GHz millimetre waves is what is catching the attention of the team. Equipment will be deployed from September to move trials from the Turin R&D centre to the San Marino living lab, focusing on areas such as Industry 4.0, public safety, Smart Parking and Gas & Water Metering applications for smart cities and digital tourism, including virtual reality.
Having signed a memorandum of understanding with the government of the microstate in July last year, San Marino could actually be one of the first country’s in the world to experience the 5G bonanza. That said, this should not be taking as a sign things are all rosy across the European continent; hooking up a microstate with a land mass of 23.63 mi² and a population of just over 33,000 should be viewed as nothing more than an experiment for TIM. Europe still lags behind North America and Asia in the race to 5G, but progress is being made.
Telecom Italia is considering its options for its various subsidiaries after revenues slipped over the first six months of 2018, while the Italian 5G auctions hover on the horizon.
Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 4.8% to €3.92 billion over the six month period while total revenues declined 2.7% to €9.51 billion. While the domestic business held steady for the moment, a slight year-on-year increase of 0.3%, the damage was done in the international wholesale business, down 5.7%, and in Brazil where revenues dropped 12.5%.
The long-term thinkers in the Italian business will now be under pressure. The convergence aspect of the business might be performing well enough, TIM quotes a 14% quarter-on-quarter increase in customers here, but the voices shouting about short-term share price and dividends will only be getting louder. According to Reuters, several conversations are underway to offload assets which would not be considered core to the business. Specific names have not been confirmed by TIM, though the management team has explicitly stated the Brazilian business is not up for sale in the past, and neither is its tower unit.
TIM does have minor brands in Italy, as well as stakes in broadcasting businesses and cable assets, though this diversification could come under threat as vocal investors start to gain a strangle hold on the fortunes of the business. Elliott has already drummed enough support to dominate the board of directors, though with these results falling below par, there might be enough ammunition for the activist investor to make a meaningful impact on the broader strategy.
The two sides of the argument are relatively simple. Vivendi is championing a long-term business model, which focuses on enhancing assets and the convergence business model. It might not be the most profitable in the short-term, but it is certainly one which would create a solid foundation for the telco in the future. Elliott on the other hand is acting exactly how you would expect; it is a vulture fund which focuses on identifying under-performing business and increasing share price in the short-term. The activist investor wants to trim costs and off-load assets to increase the dividend and share price.
One strategy is better for making money in the short-term, the second will create a business with an appropriate foundation to compete in the digital era. Unfortunately, with these results falling short of expectations, the short-term business plan might have been given more impetus.
The big complication here is CEO Amos Genish. Genish backs the long-term, convergence orientated business model, and any deviation would not be well received. There have been uncomfortable stand offs over the last couple of months, with some speculating Genish may walk should the board vote against the long-term strategy. Losing another CEO would be a disaster for TIM. This is a precarious position.
Now with added video!
TIM CEO Amos Genish has been moaning about his executive board, which has prompted the inevitable damage limitation exercise.
In early May a battle to control the TIM boardroom between major shareholders Vivendi and Elliott resulted in victory for the latter. In spite of that Amos Genish, who seemed to be clearly favourable towards the Vivendi side, decided to hang around and was confirmed in the role immediately.
A brave face was put on things from all sides, but it was hard to imagine Genish was going to be totally happy with the new boardroom arrangements and it only took him a month or so to start moaning. The timing, ahead yesterday’s board meeting, was presumably not a coincidence.
Bloomberg reported him as saying the following to reporters: “Unfortunately there are some board members who are involved in feeding untrue and unreliable speculation, interfering with management’s day-by-day work. It’s just noise, not welcomed and not expected, but I won’t be intimidated from getting my job done.”
One of the things resulting from the board meeting was the following statement: “The Board of Directors discussed the comments openly made by the CEO about some Board members, acknowledging his clarifications on the matter and his regret for having made inappropriate comments, subsequently amplified by the media. As a result of the discussion, the Board confirms that its members share a common vision and objectives for TIM, and continue to support the management team.”
Today we got another ‘clarification’ from TIM: With reference to the article published today in Il Messaggero “TIM, Genish: my comments about the BoD were inappropriate”, TIM hereby clarifies that any kind of speculation regarding the 5G auction reported in the article is groundless, and that any strategy of the Company to take part in it is absolutely premature.
And as for the supposed relationship between TIM and Bai &Company, TIM specifies it has no relations with the consultancy company on 5G and no knowledge of any Bain project on this topic.”
We’ve tried to find this article, even searching for ‘TIM, Genish dichiarazioni inappropriate le mie sul CdA’, but the only Il Messaggero piece published on the matter recently is some vanilla piece apparently parroting the official line from TIM. This implies TIM succeeded in getting Il Messagero to take the original piece down.
Genish, presumably, isn’t stupid and must have known what he was doing when he accused some of his board of briefing against him in the press. The subsequent climb-down was merely the inevitable choreographed set-piece required from such a statement, but Genish seems to be putting the Elliott dominated board on notice that he’s not going to stand for any funny business.
Telecom Italia and Mediaset have announced a strategic agreement that will allow TIMVision customers to watch all Mediaset free-to-air channels, as the telco moves towards the content aggregator role.
The convergence dream is one all telcos are chasing, though few have been able to find the magic formula for the mystic quad-play. This partnership between TIM and Mediaset perhaps shows how the telcos can add value to the content world, as opposed to trying to disrupt it, acting as the link between established players and customers.
As part of the deal, TIMVision customers will be able to access various Mediaset channels including Canale5, Italia1 and Retequattro, and will also be able to access programming from the previous seven days. Customers will be able to access the content from January 2019, as TIM drives the DigiTIM strategy forward, building a content offering which can compete with the traditional players. The difference here is that TIM is attempting to compete on grounds which are more logical.
This is shift in the industry which we have been expecting for a while, as numerous telco and technology firms attempted (unsuccessfully) to diversify revenues by creating content. Orange has been trying it without any massive success, while AT&T is battling the US government to fuel its own ambitions. We question whether attempting to infiltrate the content creator camp is the most logical step forward. Firstly, it is an established industry, and secondly, the way the business operates is completely different on a risk, operational and cultural basis.
TIM is taking the more logical route. It has customers, it has a platform, therefore why not populate that platform with other companies work. These companies are constantly looking for new ways to reach audiences, therefore a consolidated platform with 1.5 million subscribers, which acts as a content aggregator is an attractive proposition. It also plays to the advantages of the telcos; it is a functional business.
The telcos are not creative organizations. EE’s Kevin Bacon/Britney Spears/Ryan Reynolds adverts show there is little to be excited about the creative prospects of these organizations, but an aggregator platform does not require them to be imaginative or implement a bullish-risk approach. It allows them to do what they do best; deliver a functional and efficient service.
Diversification and convergence doesn’t have to be complicated or glamourous, all it has to be is realistic and valuable. This is a perfect example of how a telco can collaborate with an existing ecosystem and add value, without undertaking an unnecessary risk and disruptive strategies.