By Manuela Mesco
Telecom Italia's shareholders appointed Giuseppe Recchi as
chairman Wednesday as part of a board reshuffling that also saw a
doubling in the number of independent directors after pressure from
minority shareholders for more aggressive leadership of the telecom
giant.
Mr. Recchi will work together with Chief Executive Marco
Patuano, who has been trying to bolster a company that is under
heavy pressure at home from a sharp fall in telecom rates and
declining market share. The company needs to quickly invest in
technology to fend off such giants as Vodafone, which is sinking
billions into its Italian business. At the same time, Telecom
Italia, which posted a loss of EUR674 million ($931 million) last
year, must cut a EUR27 billion debt load.
Last year, credit agencies slashed its rating to junk, on
concerns about the size of its debt and the deterioration of
business in Italy, where around 1.2 million customers gave up on
their land lines in two years, according to regulator AGCOM.
Telecom Italia's market share in the fixed line business dropped by
almost 1.5 percentage points in the last year.
"I'm not satisfied to run a company that has been rated as
junk," said Mr. Patuano at Wednesday's shareholders meeting. "We'll
do all we can to go back to investment grade as soon as
possible."
Minority shareholder Marco Fossati, who owns 5% of Telecom
Italia, has been clamoring for months for a shake-up of the board,
attempting last December to topple it and replace it with one
including more independent members. Shareholders narrowly rejected
his proposal. The new 13-member board, whose members will serve for
three years, will now include 10 independent directors, up from
five.
Questions about the board's independence emerged last year when
Telefonica took a large minority stake in the holding company that
controls Telecom Italia, becoming the group's largest single
shareholder. That deal immediately raised strategic issues because
both Telefonica and Telecom Italia have interests in Brazil, where
they own the two largest telecom companies in the region, Vivo and
TIM Participacoes.
Minority shareholders complained that Telefonica's stake in
Telecom Italia effectively keeps the Italian company from
maximizing its Brazilian business, a charge that Mr. Patuano
denies. He said Telecom Italia plans to invest further in Brazil.
But Telefonica's directors resigned from the holding company that
controls Telecom Italia in December to ease concerns of a conflict
of interest.
More generally, Mr. Fossati charges that the situation has left
the board largely ineffective at a time when Telecom Italia must
respond more aggressively to fierce competition in its domestic
market. At Wednesday's meeting, Mr. Fossati said that he's willing
to support whoever is appointed in the new board for the sake of
the company, but added that if the board doesn't represent the
interests of all shareholders, he will push again for its
dismissal.
Mr. Recchi replaces Aldo Minucci. He had been appointed interim
chairman after the resignation of Franco Bernabe, who was chairman
and chief executive until October. The new chairman will not have
executive duties, but the board will decide which powers he will
hold.
Mr. Recchi has been chairman of Italian energy company Eni since
2011, but was replaced earlier this week by Emma Marcegaglia. He
also chairs a foreign investment committee within the business
lobby group Confindustria. Before his time at Eni, he was a senior
executive at General Electric, where his posts included being head
of southern Europe.
According to proxy advisor ISS, "Although Recchi does not have
the sector expertise, he has certainly the background, experience,
and profile to perform as chairman of Telecom Italia."
Write to Manuela Mesco at manuela.mesco@wsj.com
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