Telecom Italia seen giving minority investors more say

Mon Dec 23, 2013 10:23am EST
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By Danilo Masoni

MILAN (Reuters) - Telecom Italia (TLIT.MI: Quote) is likely to have to give minority investors more say after narrowly surviving an attempt by rebel shareholders to throw out the board, potentially complicating decisions over its prized Brazilian business.

Investor Marco Fossati, who owns a 5 percent stake, has led a campaign against the growing influence of top shareholder and rival Telefonica (TEF.MC: Quote), fearing the Spanish group might force a rushed sale of Telecom Italia's TIM Brasil (TIMP3.SA: Quote) unit to further its own ends in the fast-growing Latin American market.

Telecom Italia is controlled by Telco, an investment vehicle owned by Telefonica and three Italian investors - Generali (GASI.MI: Quote), Mediobanca (MDBI.MI: Quote) and Intesa Sanpaolo (ISP.MI: Quote). While it owns just 22.4 percent of the phone group, it has managed to appoint nearly all directors in the current board.

Telecom Italia investors on Friday rejected by a thin majority of 50.3 percent Fossati's proposal to oust the board. Though the proposal failed, it represented the first serious threat to Telco's leadership in the Italian group since it took control six years ago.

Shareholders also rejected a plan to replace two board members with candidates put forward by Telco, dealing a blow to the top shareholder and to new CEO Marco Patuano, who was picked to lead Telecom Italia's turnaround drive in October.

"The result is putting fresh pressure on the board and the management of Telecom Italia to take into greater consideration minorities," Banca Akros analyst Andrea de Vita said on Monday.

"Longer term we see governance improving and greater impact of independent directors. Unfortunately, this comes a bit late."

Since Telco took control in 2007, Telecom Italia shares have lost 70 percent, debt has remained high and its domestic business has been hit by a recession and fierce competition.   Continued...

Telecom Italia technical office personnel drives a car in Rome, December 20, 2013. REUTERS/Alessandro Bianchi