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Elliott Plans Vivendi Compromise to End Telecom Italia Feud

Angelina Rascouet and Scott Deveau
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Elliott Plans Vivendi Compromise to End Telecom Italia Feud

(Bloomberg) -- Elliott Management Corp. is preparing to compromise with Vivendi SA on board representation at Telecom Italia SpA to end their battle for influence over the indebted phone carrier, people familiar with the matter said.The agreement between two of Telecom Italia’s biggest shareholders will come with a pledge to pursue a common strategy, said the people, who asked not to be named as the plans are not public. The board changes are slated to be discussed by Telecom Italia’s directors later this month, they said.Telecom Italia shares were briefly suspended from trading after rising as much as 5.6%, their biggest intraday gain in four months. The stock was up 2% as of 3:54 p.m. in Milan.Details of the agreement have not been finalized and could still change, the people said.“We do not wish to comment apart from advising extreme caution on any such rumors,” Vivendi said in a statement. Representatives of Elliott and Telecom Italia declined to comment.Elliott’s allies wrested control of the board from top shareholder Vivendi in May last year and in November they forced out the company’s CEO, a Vivendi appointee. The French media company spent the following months publicly attacking Paul Singer’s New York-based activist fund in an attempt to regain control.Elliott hit back by criticizing Vivendi’s governance record and Vivendi backed down in late March when it became clear it lacked support for another boardroom coup.Since then, the two have sought privately to align around a common approach and turn the uneasy truce into a lasting peace, said a person familiar with the matter.Depressed SharesTen out of Telecom Italia’s 15 board directors are aligned with Elliott and the rest with Vivendi. Elliott wants to maintain its overall influence on the board, the person said.There is no clear answer to Telecom Italia’s problems. Competitive threats to both its legacy fixed-line network and wireless business are undermining the profits it needs to service one of the European industry’s biggest debt loads. The Milan-based carrier’s shares, which haven’t paid a regular dividend for the past six years, tumbled to a record intraday low in January.The biggest strategic flashpoint has been Elliott’s call for a full spinoff of the landline network to help pay down debt, an idea that Vivendi resisted. Chief Executive Officer Luigi Gubitosi has focused for now on cutting costs and doing deals to share the burden of new network spending, and results in May showed those efforts were starting to pay off.The CEO has pushed for some form of tie-up with fixed-line rival Open Fiber SpA to shore up the landline business. Any combination or spinoff of the landline business is fraught with regulatory and political risks.(Adds Vivendi response in fifth paragraph.)\--With assistance from Tommaso Ebhardt and Daniele Lepido.To contact the reporters on this story: Angelina Rascouet in Paris at arascouet1@bloomberg.net;Scott Deveau in New York at sdeveau2@bloomberg.netTo contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer, Ben ScentFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- Elliott Management Corp. is preparing to compromise with Vivendi SA on board representation at Telecom Italia SpA to end their battle for influence over the indebted phone carrier, people familiar with the matter said.

The agreement between two of Telecom Italia’s biggest shareholders will come with a pledge to pursue a common strategy, said the people, who asked not to be named as the plans are not public. The board changes are slated to be discussed by Telecom Italia’s directors later this month, they said.

Telecom Italia shares were briefly suspended from trading after rising as much as 5.6%, their biggest intraday gain in four months. The stock was up 2% as of 3:54 p.m. in Milan.

Details of the agreement have not been finalized and could still change, the people said.

“We do not wish to comment apart from advising extreme caution on any such rumors,” Vivendi said in a statement. Representatives of Elliott and Telecom Italia declined to comment.

Elliott’s allies wrested control of the board from top shareholder Vivendi in May last year and in November they forced out the company’s CEO, a Vivendi appointee. The French media company spent the following months publicly attacking Paul Singer’s New York-based activist fund in an attempt to regain control.

Elliott hit back by criticizing Vivendi’s governance record and Vivendi backed down in late March when it became clear it lacked support for another boardroom coup.

Since then, the two have sought privately to align around a common approach and turn the uneasy truce into a lasting peace, said a person familiar with the matter.

Depressed Shares

Ten out of Telecom Italia’s 15 board directors are aligned with Elliott and the rest with Vivendi. Elliott wants to maintain its overall influence on the board, the person said.

There is no clear answer to Telecom Italia’s problems. Competitive threats to both its legacy fixed-line network and wireless business are undermining the profits it needs to service one of the European industry’s biggest debt loads. The Milan-based carrier’s shares, which haven’t paid a regular dividend for the past six years, tumbled to a record intraday low in January.

The biggest strategic flashpoint has been Elliott’s call for a full spinoff of the landline network to help pay down debt, an idea that Vivendi resisted. Chief Executive Officer Luigi Gubitosi has focused for now on cutting costs and doing deals to share the burden of new network spending, and results in May showed those efforts were starting to pay off.

The CEO has pushed for some form of tie-up with fixed-line rival Open Fiber SpA to shore up the landline business. Any combination or spinoff of the landline business is fraught with regulatory and political risks.

(Adds Vivendi response in fifth paragraph.)

--With assistance from Tommaso Ebhardt and Daniele Lepido.

To contact the reporters on this story: Angelina Rascouet in Paris at arascouet1@bloomberg.net;Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer, Ben Scent

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.