Increased Pressure on Telecom Italia to Normalise its Shareholding Structure
Published on: 16th Jan 2014
By: Ian Mansfield
Telecom Italia's CEO is throwing his weight behind plans that could see Telefonica's influence over the Italian firm sharply reduced.
At the moment, a holding company, Telco has effective control over Telecom Italia as despite owning just 22.4% of the shares, can appoint four-fifths of the directors. Telefonica is the majority shareholder in Telco.
The "four-fifths" board rule has been in place since 1997, when Telecom Italia was privatized by the government.
An activist shareholder, Marco Fossati, who owns 5 percent to Telecom Italia is pushing for the shareholding structure to be normalised so that minority shareholders are not penalised by the current system. In this, he is reported to have the backing of Telecom Italia's newish CEO, Marco Patuano.
Directors gathering in Milan will start reviewing a motion by investors led by Marco Fossati to strip Telco's power to name four-fifths of board members, Bloomberg News reported, citing unnamed sources.
The activist, Fossati is also concerns about ongoing, if often denied, reports that Telecom Italia could sell its Brazilian subsidiary. That company, which is also listed on the Brazilian stock market is worth just under US$13 billion, but Fossati says that any sale should price the business at closer to US$40 billion.
However, if Telecom Italia's shareholding structure is revised, and Telefonica's influence reduced, then that reduces the pressure on Telefonica to seek a resolution to the issue it faces in Brazil where regulators are concerned that it controls two mobile networks.
That reduces the pressure on Telecom Italia to sell its Brazilian stake, but raises pressure on the company to find an alternative way to pay down its sizable debt mountain.
On the web: Bloomberg News