Telecom Italia pays tribute to its departing chief executive as it hands Cattaneo his €25m pay-off

Alan Burkitt-Gray
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For a CEO who’d been in the company not much more than a year, Flavio Cattaneo built up a strong following in Telecom Italia before his exit at the end of July.

He delivered a “major and extra-ordinary turnaround of the business”, said the company, which now trades in Italy and Brazil as TIM.

It celebrated “all the positive quarterly reports” since his arrival in March 2016. They were “positive on every line, which demonstrate a major reorganisation of internal processes, efficiency plans on non-core costs, and revenue plans, which saw company increase its customers and revenues to levels not reached in the last 10 years”. 

Such eulogies to a departing CEO are rare – especially for a CEO who probably didn’t want to leave and went only because Vivendi, the French company that has only 24% of Telecom Italia’s shares, wanted to employ one of its own alongside Cattaneo. 

Vivendi has been stalking Telecom Italia for at least two years. In June 2015 it replaced Telefónica as the largest shareholder in Italy’s former incumbent. It built up its stake as part of a deal to sell Brazilian company GVT to Telefónica Brasil. Vivendi said at the time: “This investment [in Telecom Italia] represents an opportunity for the group to be present and to expand in a market with significant growth prospects and a very strong appetite for quality content.” 

But it was GVT that brought Amos Genish, Cattaneo’s bête noire, into the scene. Genish founded GVT, then sold it to Vivendi in 2009 for €2 billion. Three years ago Telefónica Brasil agreed to pay €9 billion to absorb GVT, including Genish as head of the combined operation. 

He quit “for personal reasons” in October 2016, only to turn up in Paris in January, personal reasons apparently resolved, to become Vivendi’s chief convergence officer, which by then had built up its stake in Telecom Italia. 

It was, and is, the biggest shareholder, though other shareholders still own 76%. 

Apart from TIM, Vivendi didn’t have much to converge: it had owned SFR, one of the big French mobile operators, but in 2014 it sold the company to Altice, the owner of cable company Numericable, for €13.5 billion, plus an earn-out of €750 million. 

It was clear that Genish had been brought into Vivendi as a potential head of TIM, to wait for the French group to acquire control. And throughout the first half of 2017 control is what Vivendi did acquire, bit by bit. In April it nominated former Telecom Italia CEO Franco Bernabè to the board: he had resigned in 2013 after a previous board had turned down his restructuring deal. Bernabè was chair of the GSMA at the time, a position he had to relinquish as he no longer represented a member company. 

Vivendi also nominated its CEO, Arnaud de Puyfontaine, to the board, along with its CFO, Hervé Philippe, and its general counsel, Frédéric Crépin. With that, Vivendi achieved dominance of the Telecom Italia board. De Puyfontaine became deputy chairman, but it was believed that Vivendi wanted him to become chair of the company – and that’s what he has been since June, with previous chairman Giuseppe Recchi demoted to deputy.

Cattaneo’s departure from the company met with undisguised opposition from within the board. TIM admitted in a statement: “The board of statutory auditors has expressed non-favourable, non-binding opinion [about Cattaneo’s removal]”, clearly implying that the auditors were unhappy with the Vivendi coup d’état. 

This impression was reinforced by a separate statement from TIM, which paid tribute to Cattaneo’s contribution to the company while he was CEO. The company increased its core investments, and Cattaneo brought it “back to leadership of the mobile segment” and under his direction TIM covered “around 70% of the country with fibre”. 

TIM added: “It is universally recognised that such a recovery has never before been seen, making it the first among the major telecommunications companies that were formerly incumbent in Europe and the US, in terms of speed of growth of all main top line drivers, and of profitability, as well achieving the greatest coverage in fibre.” TIM thanked him “for the major task he undertook”.

Where will Cattaneo go next? Not to a TIM competitor for the 12 months, as it will withdraw €2.1 million of his €25 million compensation if he does. Marco Patuano, his predecessor at Telecom Italia until just last year, now runs the Benetton family holding company. Before joining TIM, Cattaneo ran the Italo high-speed train company. Helped by that $25 million, he’ll probably be OK.