Battle for Telecom Italia has all the intrigue of a mafia story
Christopher Williams
Updated
Idrama image of Bollore, Berlusconi and SInger
‘He used the composure and delicacy of an Attila,” said Marina Berlusconi, eldest daughter of former Italian prime minister Silvio. Her barb was directed at Vincent Bollore, the French tycoon behind the media giant Vivendi, who has crossed the Alps to seize control of Telecom Italia and attack the Berlusconi empire.
Under normal circumstances, 66-year-old Bollore would probably take pride in a comparison with the legendary king of the Huns. The mercurial Breton is said to relish the frequent public battles that have marked his long and successful career as a corporate raider.
This time, however, he was busy being arrested and interrogated over allegations of corrupt deals with African politicians. The industrial side of the Bollore empire has links to Francophone Africa going back decades, and has served as the launchpad for his more recent pursuit of media moguldom.
The Bollore-controlled advertising group Havas allegedly helped influence elections in exchange for the logistics contracts. Bollore Group has denied the allegations and said its chairman “remains presumed innocent” following a rare move against the French business elite by authorities while president Macron was across the Atlantic visiting Donald Trump. Nevertheless, Bollore’s legal troubles are a gift to his Italian enemies. As well as the Berlusconi dynasty, he is up against Elliott Management, the US hedge fund controlled by billionaire Paul Singer and his London-based son Gordon.
Fresh from its successful campaign in the UK to force a split at Whitbread, Elliott has set up a dramatic confrontation at Telecom Italia’s shareholder meeting this Friday. The activist, which owns 9pc of the company, aims to replace the Bollore-approved board with Italian business figures it claims will be more independent. Elliott claims Telecom Italia has been run in the interests of Vivendi, for instance by doing a marketing deal with Havas.
Paul Singer of Elliott is increasingly targeting European companiesCredit: Bloomberg
“There is no direct link between the African ports case and Telecom Italia,” says Francois Godard, of Enders Analysis. “But Bollore’s arrest is obviously a boost to people arguing in Italy that he is not the right person to control Telecom Italia.”
Elliott leapt on Bollore’s arrest right on cue. In a letter to other Telecom Italia shareholders, it said it was “deeply troubled” by a development that was “just the latest instance of a troubling track record of conflict, self-interest, and even graver issues of potential criminality by those who would purport to ask for our trust in guiding Telecom Italia”.
Regardless of his arrest, this week’s vote will be the climax of a battle that has prompted questions over whether Bollore has finally bitten off more than he can chew by taking on Italy and the powerful interests surrounding its main broadband network.
It began as a textbook Bollore operation. From 2015, he used Vivendi to gradually take control of Italy’s former state telecoms monopoly.
Vivendi, itself controlled by Bollore via a minority stake, gained a chunk of Telecom Italia when it sold its Brazilian telecoms arm, GVT, to Spain’s Telefonica. It built the stake up to 24pc, ousted the board and management, and installed Bollore lieutenants. Observers believed Bollore and Vivendi had an eye on a quick sale of Telecom Italia at a profit, but it did not work out that way.
“Things did not turn out as expected as AT&T, Orange, Deutsche Telekom and even Telefonica failed to bid,” says Godard. “This battle with Elliott may reveal that Bollore does not really have control of Telecom Italia, undermining his stake’s value. Investing in Italy is like walking in quicksand and Bollore is now to his chest.”
Silvio Berlusconi's battle with Bollore comes as he makes a political comebackCredit: AFP
With no buyer, Vivendi developed a plan to use Telecom Italia as the basis of an expansion effort in southern Europe. Although not a media player in its own right, its broadband network is a potentially powerful weapon in discussions over the future of pay-TV as distribution shifts from satellite to fibre optics. Bollore aimed to deploy it to seal a pact with the Berlusconi family and take on Sky.
In 2016 Vivendi agreed to buy control of Mediaset Premium, the struggling pay-TV arm of Berlusconi’s television network Mediaset. The deal quickly turned sour, however, and Bollore sought to pull out, claiming the finances of the business were much worse than had been disclosed. Both sides turned to the Italian courts, as Berlusconi complained Bollore had broken a contract and Vivendi accused Mediaset of creative book-keeping.
Bollore went further. As part of the deal, Vivendi had taken a 3.5pc stake in Mediaset. Bollore quickly increased the stake to 29pc in a direct challenge to Berlusconi’s control. The dynasty’s holding company, Finivest, controls Mediaset via its 40pc stake. As Bollore laid siege Silvio was recuperating from a major heart operation, a coincidence that helped turn the dispute personal as the Berlusconi family took offence.
Telecom Italia is under Government pressure to upgrade its broadband infrastructureCredit: Bloomberg
Vivendi’s hard-charging approach also upset the Italian government and competition authorities, which later forced the French to put part of their Mediaset stake into a blind trust.
In a country where political intrigue is second only to football as a national sport, many in Italy and some at Vivendi now see the former prime minister’s hand behind Elliott’s attack on Telecom Italia. The hedge fund and Finivest are not strangers. When Silvio Berlusconi sought to sell AC Milan to a Chinese investor last year, it was Elliott that stepped in with a €128m (£112m) loan when the buyer struggled to get the cash together. If Elliott does not get its money back by October, the club will fall under its control.
Elliott dismisses suggestions it is carrying out a vendetta against Bollore on Berlusconi’s behalf as a conspiracy theory, noting that if it had not backed the takeover of AC Milan, the former prime minister could have kept both the club and what money the Chinese buyer had laid down.
An attempt to sell AC Milan is thought to have been scuppered by ElliottCredit: AP
Godard, of Enders, believes Elliott’s motive is purely financial. “Their approach is bold, but following recognisable paths,” he says. “They bought in at a low price and want the company to spin off core units to boost the stock price, straight from the scenario of the movie Wall Street.”
Elliott’s approach has confused some, however. It has called for Telecom Italia to sell off its network, a move vehemently opposed by management. At the same time, the activist has backed Amos Genish, the chief executive brought in by Vivendi, whose own strategy stops far short of such a radical move and has widespread support. “What incumbent operator in its right mind would sell off its core fixed network,” asks Godard.
Elliott's tactics have been likened to those of Gordon Gekko, played by Michael Douglas in the film Wall StreetCredit: Reuters
Genish is perhaps Vivendi’s best asset in the battle. A star of the telecoms firmament highly regarded by investors of all stripes, he was massively successful in Brazil and sold GVT to Vivendi. Elliott aims to keep him on even if it manages to oust the Vivendi-appointed board and, as the vote approaches, has sought to reframe a network sale as merely an idea a more independent board might want to keep under consideration.
With signs that the vote is finely balanced, Genish has also walked a line. Even if Elliott does not succeed in ousting the entire board, Italian voting rules mean five of its nominees will be appointed. This weekend, however, Genish made clear he will not stay if Elliott secures a full win.
“The issue for me isn’t about which side I’m on,” he told The Sunday Telegraph. “I am the CEO of Telecom Italia and I am on Telecom Italia’s side. The question is whether or not I have shareholders and a board who stand behind the business plan.”
But he added: “I can’t see how a CEO could implement a plan he doesn’t believe in. On May 4, after the shareholder meeting, we will have a new board.
“If the Vivendi slate does not get the majority of votes, because this is clearly the only slate to support our long-term industrial plan I firmly believe my position as CEO would be untenable.”
Genish has rebuilt bridges with Italian officialdom that were burned by Bollore’s aggressive earlier moves, although CDP, Italy’s sovereign wealth fund, has taken a stake in Telecom Italia and seems likely to back Elliott.
“We need each other,” says the chief executive, who like BT is under pressure to invest more and work with rivals on ultrafast broadband investment. “I’ve made it a priority to work in close co-operation with the government and regulatory bodies. I think the relationship has dramatically improved in the last six months.”
Neither Elliott nor Vivendi is confident of victory this weekend. Vincent Bollore used to joke he would know Vivendi had hit the big time when Paul Singer came after him. He has his wish, albeit in less triumphant circumstances than hoped.
