TI Telecom Italia S.P.A. New

By Nick Kostov in Paris and Eric Sylvers in Milan 

PARIS -- Telecom Italia SpA on Monday said Chief Executive Flavio Cattaneo has resigned, amid mounting tensions with shareholder Vivendi SA.

Mr. Cattaneo is the second CEO to leave the company in little over a year as Vivendi, led by French billionaire Vincent Bolloré, exerts control over the Italian carrier. The French media and entertainment company built a stake of nearly 25% in Telecom Italia -- just below the level at which an investor must make a takeover bid. Mr. Cattaneo had held the top job since March 2016 when he took over from Marco Patuano, who left after a disagreement with Vivendi over strategy.

Mr. Cattaneo walks away with a payout of EUR25 million ($29.2 million), one of the highest every exit packages in Italy for such a short-serving executive. The payout includes EUR22.9 million that takes into account financial targets reached during the executive's time at the helm and another EUR2.1 million in a one-year noncompetition agreement with Telecom Italia's main competitors in Italy and Brazil.

Telecom Italia said Mr. Cattaneo's exit, which will take effect July 28, was related to his meeting the company's financial targets ahead of time and the need for a manager with different skills. But people familiar with the matter said it follows disagreements between Vivendi management and the Italian executive. Mr. Cattaneo didn't respond to an email seeking comment.

Amos Genish, who is leading Vivendi's efforts to expand its content distribution across platforms, is set to take over most of Mr. Cattaneo's responsibilities, people familiar with the matter said. Telecom Italia Monday didn't name a new CEO, but said its board would meet July 27 to discuss the appointment of a successor.

Vivendi wants Telecom Italia to quickly transform its model to address stiff competition from the likes of Italian utility Enel SpA and France's Iliad SA, according to people familiar with the matter.

Vivendi didn't make a statement on Monday.

Arnaud de Puyfontaine, CEO of Vivendi and chairman of Telecom Italia, is also expected to be handed more executive responsibilities, as is Giuseppe Recchi, deputy chairman of the Italian company, according to the people.

People familiar with Vivendi's position said it began to lose confidence in what it considered to be Mr. Cattaneo's brash style after he clashed with Italy's government over the rollout of ultrafast broadband, although Italian Industry Minister Carlo Calenda said this month that the differences had been resolved.

Vivendi was also upset about Mr. Cattaneo's apparent unwillingness to work closely with its managers, the people said. It tried to limit Mr. Cattaneo's powers by appointing a managing director to assume some of his powers but that option was shot down by the Italian executive who wanted more autonomy to complete a turnaround of the company.

"The situation was becoming crippling," said one of the people.

Still, Vivendi in recent months has praised Mr. Cattaneo's tenure, with recent earnings reports suggesting that Telecom Italia's turnaround efforts are bearing fruit, even though the Italian company's stock fell by about 15% during the executive's tenure. The Italian company's first-quarter revenue rose 8.5% from a year earlier, while operating profit climbed nearly 23%.

Vivendi, whose assets include record label Universal Music Group and French pay-TV station Canal Plus, is trying to piece together a media empire focused on southern Europe. The company, founded as a water utility during the reign of Napoleon III, splashed out more than EUR3 billion for its stake in Telecom Italia.

Vivendi continues to be embroiled in legal disputes with Silvio Berlusconi's Mediaset SpA in Italy after pulling out of a deal last year to buy pay-TV unit Mediaset Premium.

Write to Nick Kostov at Nick.Kostov@wsj.com and Eric Sylvers at eric.sylvers@wsj.com

(END) Dow Jones Newswires

July 24, 2017 16:15 ET (20:15 GMT)

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