Investor campaign against Telecom Italia board gains traction

Wed Dec 4, 2013 1:23pm EST
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By Danilo Masoni and Stefano Bernabei

MILAN/ROME (Reuters) - An activist shareholder campaign to reform Telecom Italia won traction on Wednesday as influential proxy adviser ISS recommended institutional investors back a proposal to remove the company board at a meeting on December 20.

The potentially disruptive vote comes as Italy's biggest phone company by market share tries to revive years of sluggish growth and share underperformance while at the same time cutting its 28 billion euros of debt.

Businessman Marco Fossati, Telecom Italia's No.2 investor through his 5 percent stake, and small shareholders group ASATI have proposed to oust the Italian phone company's board, which they say caters more to the interests of core shareholders such as Spain's Telefonica than to other investors.

Holding company Telco, which owns 22.4 percent of Telecom Italia, is controlled by Telefonica together with Italian financial companies Assicurazioni Generali, Intesa Sanpaolo and Mediobanca.

If a majority of shareholders ditch the current board, led by Chief Executive Marco Patuano, they would have to choose a new slate of directors. Fossati's family holding company Findim is backing a list of seven new directors presented by Italian asset managers' association Assogestioni.

"On balance the removal of the board and the presence of the Assogestioni slate on the Telecom Italia board would likely prove beneficial to long-term shareholder value," proxy advisers ISS said in a report for clients seen by Reuters. "Hence, a vote FOR this item is warranted."

Miguel Carrasco, managing director at proxy solicitor Proxycensus estimates that institutional investors following the ISS recommendations could exceed 9 percent of the votes at the next meeting of Telecom Italia, assuming that more than half of the company capital is represented.

Yet, top shareholder Telco has already said it would vote against Fossati's proposal.   Continued...

A Telecom Italia antenna booster is seen in northern Rome November 12, 2012. REUTERS/Alessandro Bianchi